Invoices and Credit Memos in Oracle AR:

Glossary:
Invoice: A document that will convey how much the customer has to pay for the goods and
services he has bought and due date for paying the amount.
Credit Memo: Negative amount to decrease the balance of the invoice.
Balance of Invoice: The amount that the customer has to pay.

Example of scenario in which a Credit Memo is created:

Say you have created an invoice of $5000 for a customer ABC and have sent it across. Later
upon receiving the goods, customer realized one of them worth $1000 is defective and had to
return it. We have already issued an invoice of $5000 but now we are supposed to charge them
only $4000 because of the refund of $1000 for the defective piece. In such a situation, we create
a credit memo of $1000 and apply to the invoice of $5000 to bring down its balance to $4000.
We again send the credit Memo note to the customer to let them know that they have to pay us
only $4000.

Demo on how to
Create Invoice
Create Credit Memo
Apply Credit Memo to Invoice
Check the balance on the Invoice (should decrease)
Underlying Tables

1. Create Invoice:
Navigation: Receivables Responsibility > Transactions > Transactions
 Description of some important field in Transaction window:
Source: Lets you to identify the source of the invoice meaning whether invoice is created
manually or has been imported.
Navigation: Setup> Transactions > Sources

Source Setup lets you define the below:

If automatic Numbering should be used
If the Reference field in Transaction window should hold the Sales Order number (if it has been
imported from Sales Order)
Which Transaction Class can use this Source
Class: What type of transaction you want create. Enter Invoice here.
Number: A unique identifier for the transaction created. If automatic numbering is enabled in
Source setup, the number will be generated automatically else will have to enter the number
manually.
Type: Transaction Type is another setup screen that lets you default some of the attributes like the
below when you are creating a transaction:
GL Accounts for Receivables ,Revenue and other account classes that are required for
accounting.
For what kind of transactions this information should be defaulted
Whether positive mount or negative amount can be entered while creating the transaction
Reference: Holds the Sales Order number if it has been imported from Sales Order
Legal Entity: Give the name of the Legal Entity for which this transaction has to be created in
Date: Date for the invoice
GL Date: Date that should be used when this transaction is being transferred to GL
Bill to: Enter the Customer name to whom the invoice has to be raised.
Currency: Currency that is being used to report the amount in
Payment Term: When the invoice is due meaning by when the customer is expected to pay the
amount on the transaction.
Payment Details: The bank details you are expecting the customer to deposit the amount to.Enter
the details and click on Apply.
 Once the above fields are entered, save the work.

Click Line Items button to enter the invoice line details

Enter the Item, quantity and the unit price of the item and save the work.
 Complete the transaction by clicking the Complete button. Only if the transaction is Complete,
further actions can be done on it.

Distributions are automatically created. What GL Accounts to use will be decided by the
Transaction Type setup.

And our invoice 501005 is created.

2. Create Credit Memo :

Navigation: Receivables Responsibility > Transactions > Transactions
Enter the below fields:
Class: Credit Memo
Type: Appropriate transaction type for Credit Memo
Bill To: Customer Name for whom this Credit Memo is being created
Payment Details: Enter the Bank Account details

Click on Line Items button to create the CM line.

Item: Enter the item being returned.
Amount : -1000 as this is the refund that we giving to the customer for returning the item.
 Save the work.
Complete the transaction by clicking the Complete button on the Transaction window.

With this CM 501006 is created.

3. Apply the CM to Invoice.

Navigation: Receivables resp > Transactions > Transactions

Query the CM (501006) that you want to apply:

From the menu select Actions > Applications

Enter Apply To as 501005 which is the Invoice number that you want to apply this CM to.

Save the work.

4. Check the balance on the Invoice.
Query the invoice 501005. Since CM has been applied, the balance of the invoice is $4000.
That means customer has
to pay us $4000 only and not $5000.

Click on Details button in Balance Due section which will give you a detailed activity
happened against the
invoice and what is the balance at the end of the day.
Since a CM worth $1000 has been applied to it, you see that activity against Credits entry.
5. Underlying Tables that get populated when an invoice is created
RA_CUSTOMER_TRX_ALL Stores Invoice Header details
RA_CUSTOMER_TRX_LINES_ALL Stores Invoice Lines details
RA_CUST_TRX_LINE_GL_DIST_AL Stores Invoice Distribution details
AR_RECEIVABLE_APPLICATIONS_ALL This table gets populated when credit memo is
applied to invoice / anything
gets applied to anything.