Unbilled Receivable and Unearned Revenue Accounts

Question

We are using expenditure items for generating revenue and then for billing.
When we generate revenue, the entry is: Revenue Cr to Unbilled Receivables Dr
When we generate Invoice, the entry is: Unbilled Receivables Cr to Receivables Dr, which is file
If we cancel above invoice for some reason and again process invoice, then entry is: Unearned Revenue Cr to Receivables Dr
Due to this, we are having Unbilled Receivables & Unearned Revenue balance in the system (though the amount in both accounts is same & it nullfies, it is not correct representation). Ideally, when we regenerated invoice, the entry should have been: Unbilled Receivables Cr to Receivables Dr
Let us know why the system is bringing Unearned Revenue account in picture in this case.
Regards,
Ketan

Answer 1

Ketan,
Let me see if I understand what you are saying. You have generated the draft invoice and interfaced it to Accounts Receivable, correct? That part is working okay, it looks like.
How are you cancelling the invoice? Are you doing that in Project Billing? Is it correct to assume that you are doing the "Cancel a released invoice" process, rather than the "Write off an invoice" process? Cancelling an invoice will create a credit memo for the entire amount of the canceled invoice (at least in R11, which is what I am on - you did not mention what version you are on). Did you get the credit memo generated and posted? If so, what was the resulting entry for that credit memo? That is what you need to focus on first, I thiink. If that entry is Unearned Revenue Debit and Receivables Credit, then it does make sense that when you regenerate the invoice, the entry would be Receivables Debit and Unearned Revenue Credit.
I am guessing here is how the Oracle designers were thinking. Again I am guessing. And I am not saying I agree/disagree with such thinking. I think the idea is that it is not going to be unbilled receivables now because you had billed the revenue at least one time. After all, the cancellation technically does not undo the billed invoice - it merely creates a credit memo. The revenue had already been generated, so the Revenue account does not come into play. So, if not unbilled receivable, and you don't touch revenue, by default that leaves the unearned revenue account to hit.
Now, like you, I would think Unbilled Receivables would be the better account to hit. It could be possible that you have run across a program bug here. So here is my thought process -
1. What was the journal entry generated by the invoice cancel?
2. Is the journal entry generated by the invoice regeneration not the reversal (in effect) of the credit memo entry?
3. If those two entries are not offset, I would log a service request with Oracle support. Either they have a bug or they have a design flaw. Of course if a design flaw, then you are stuck. You would have to enter an enhancement request to get Oracle to change the process.
4. However, if those two entries do offset, and it sounds like they do, then you have a system that seems to be working as designed. In that case you need to submit an enhancement request to have Oracle change its current process.
Does this make sense?
John Dickey