What is profitability? How do you map 'segment wise
profitability' in Oracle?
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Answer Posted / soumendu
The Accounting standards in various countries expects the
organization earning revenue from multiple product segments
to show the segment wise profitability information as a
part of the Financial Reporting.
Here is how you can set up the same in R11i.
1. Set up an item category as 'Product Segment'.
2. In the GL Set of books, create a chart of account
segment as 'Product Segment'. Give validation as table, and
link it to the product segment field in the item category
table.
3. Set up the cost of goods sold account in such a way that
for each item, the corresponding 'Product Segment' value is
debited during a shipment.
4. In the item attributes for invoicing, change
the 'Product Segment' value in the 'Revenue Account' field
to the corresponding value for each item.
5. In AR, set up the auto accounting to pick the 'Product
Segment' Value from the 'Standard Lines' for Revenue
Account.
6. Create an FSG report to capture Total Revenue, Total
Cost and the Profitability for each Product Segment.
In R12 there is a feature called 'Supporting Reference'
which can provide you with the same information. This means
that you need not create a chart of account segment
called 'Product Segment' in your ledger. However you will
need to create a custom report to provide you with the
profitability since segment wise revenue information is
available in AR and segment wise cost information is
available in 'Cost Management' for Discrete inventory
and 'OPM Financials' for OPM
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