Recognizing Cost of Goods Sold (COGS)- Oracle R12

Recognizing Cost of Goods Sold (COGS)

There are three steps to processing Cost of Goods Sold:

1.       Defer cost of goods

2.       Recognize cost of goods

3.       Create journal entries

Order To Cash Cycle - Cost Of Goods Sold Processing Steps

In R12, the Cost of Goods Sold is automatically deferred when the item is shipped.  This deferral happens when the Shipping module interfaces a Sales Order Issue transaction to the Inventory module.  After you have recognized revenue in the Receivables module, you can perform step 2 and recognize Cost of Goods Sold.

You will need to run three programs:  Record Order Management Transactions, Collect Revenue Recognition Information, and Generate COGS Recognition Events.  These programs will calculate the percent of COGS to recognize based on the percent of revenue that was recognized.  The Generate COGS Recognition Events program will create a new transaction record in the Inventory module for accounting.  Once you have these three programs you are ready to perform the last step and create accounting.

In R12, all journal entries are created by using Subledger Accounting programs.  The transactions in the Inventory module are accounted for in the Cost Management module, you can create journal entries by using the “Create Accounting – Cost Management” program.