Accounting Entries in O2C (Order to Cash) Cycle – Oracle Fusion

 

Accounting Entries in O2C (Order to Cash) Cycle – Oracle Fusion

Below is a step-by-step breakdown of the main stages in the O2C process and the typical accounting entries at each stage.

🔹 1. Sales Order Booking

No accounting entry is generated at this stage. It’s just an order capture.

🔹 2. Order Picking & Shipping (Inventory Issue)

When goods are shipped, inventory is relieved.

Accounting Entry (from Inventory / Cost Management):

  • Dr. Cost of Goods Sold (COGS)

  • Cr. Inventory Valuation Account

✅ This reflects that goods have left inventory and are now considered sold from a costing perspective.

🔹 3. COGS Recognition (if deferred until invoicing)

Depending on configuration, COGS may be recognized later (at invoicing), using deferred COGS.

Accounting Entry (at invoicing time if deferred COGS is enabled):

  • Dr. COGS

  • Cr. Deferred COGS

🔹 4. Invoice Generation (AR Transaction Creation)

When the invoice is created in Accounts Receivable, revenue is recognized.

Accounting Entry (from AR):

  • Dr. Accounts Receivable

  • Cr. Revenue

  • Cr. Taxes (if applicable)

✅ This records the receivable and recognizes revenue for the sale.

🔹 5. Customer Payment Receipt

When the customer makes a payment.

Accounting Entry (from AR Cash Receipt):

  • Dr. Cash / Bank Account

  • Cr. Accounts Receivable

✅ This clears the customer receivable and reflects the cash collection.

🔹 6. Bank Reconciliation (Optional)

Once the receipt is reconciled with the bank statement (via Cash Management module), no additional entries are usually posted unless there are bank charges or differences.

🔹 Optional Scenarios:

🔸 Freight Revenue (if separately charged):

  • Dr. Accounts Receivable

  • Cr. Freight Revenue

🔸 Tax (if applicable):

  • Dr. Accounts Receivable

  • Cr. Tax Payable (Sales Tax, VAT, etc.)

Summary Table

StepDr (Debit)Cr (Credit)
Shipping (Inventory Issue)COGSInventory Valuation
Invoice CreationAccounts ReceivableRevenue / Tax / Freight
Payment ReceiptCash / BankAccounts Receivable
COGS Recognition (Deferred)COGSDeferred COGS

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