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Configure Accounting Rules

Zuora

Configure Accounting Rules

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You can configure accounting rules to give you more control over your accounting in Zuora. This page describes each of the accounting rules.

To access the accounting rules, click your username at the top right and navigate to Finance > Configure Accounting Rules. After you have changed a rule, you must click save for the change to take effect.

Accounting Rules

The accounting rules are described below.

Allow blank Accounting Codes

If this rule is set to Yes, you can configure blank accounting codes when you configure new accounting codes for transactions, such as payments or refunds, and for product rate plan charges.

If you already have blank accounting codes configured and then change this rule from Yes to No, transactions can still be created with a blank accounting code. To avoid that, you must configure proper accounting codes for the transactions.

By default, this rule is set to No.

Allow Subscription and Amendments to be created in a closed Accounting Period

You must have the Zuora Finance feature to use this rule.

If this rule is set to Yes, you can create subscriptions and amendments even if they are in a closed accounting period. The invoices generated from these subscriptions and amendments are posted to the earliest open accounting period.

This rule does not affect transactions, such as invoices or payments, that are in closed accounting periods. 

By default, this rule is set to Yes.

Allow Usage to be created in a closed Accounting Period

If this rule is set to Yes, you can create and delete usage records even if they are in a closed accounting period.

If a usage record's start date is in an open accounting period, you can also update it to a date in a closed accounting period.

Note that if this rule is set to No, the start date of usage records in an open accounting period cannot be updated to a date in a closed period.

By default, this rule is set to No.

Allow Revenue Schedules to have negative amounts in the Open-Ended Accounting Period

You must have the Finance and Revenue features for Zuora Finance to use this rule.

If the rule is set to Yes, you can distribute any amount of revenue. This leaves the possibility that you might distribute too much revenue and have a negative amount in the Open-Ended accounting period.

If the rule is set to No, an error is raised if you try to distribute too much revenue. For example:

  • If the revenue schedule amount is $100, you must distribute a total amount of $100 or less, for example, $50.
  • If the revenue schedule amount is −$100, you must distribute a total amount of −$100 or more, for example, −$50.
  • If the revenue schedule amount is $0, you must distribute a total amount of $0.

When you change the rule to No, it only takes effect for new revenue distributions and does not impact previous revenue distributions.

By default, this rule is set to Yes.

Aggregate transactions with different currencies during a Journal Run

You must have the Zuora Finance feature enabled and you must have set your home currency to use this rule. See Foreign Currency Conversion for information about setting your home currency.

If the rule is set to No, journal runs will generate separate summary journal entries for each currency.

If the rule is set to Yes, journal runs will aggregate transactions with different currencies into the same summary journal entries. All journal entry amounts are shown in your home currency only.

By default, this rule is set to No.

Note that journal entries in an accounting period must either all be aggregated or all be unaggregated. You cannot have a mix of aggregated and unaggregated journal entries in the same accounting period.

See Foreign Currency Conversion for Summary Journal Entries.

Use Cash Account for Unapplied Payment Transfer Accounting

This setting is available only if you have the Invoice Settlement feature enabled on your tenant.

This setting is only applicable to the payment transfer use case. The default value is No, which indicates that journal entries will be created as a credit and a debit to the Unapplied Payment account for both customer accounts (Transfer From and Transfer To). 

If you set this setting to Yes, the journal entries that are created will use the Cash account as an offset to the Unapplied Payment account. Namely, the following journal entries will be created:

  • For Transfer From customer account: a debit to Unapplied Payment, and a credit to Cash.
  • For Transfer To customer account: a debit to Cash, and a credit to Unapplied Payment.

Cash-based accounting start date

The cash-based accounting start date configuration drives a feature created for the Japanese entities using Zuora Billing and Zuora Revenue together. When this date is set, the payment-based accounting logic gets enabled (instead of the accrual-based rules), so the billing accounting entries are delayed until the time of payment receipt per JGAAP requirements.

Cash-based accounting logic

As part of the business process, invoices need to be posted, but Deferred revenue accounting is delayed until the time the payment is received. When a billing document (Invoice, Credit memo or Debit memo) is posted in Zuora Billing, until not paid, no accounting entries will be recorded with the Journal entry run. This means that the Accounts Receivable and Deferred Revenue entries are not created and are delayed until payment, even if the document is in Posted status. 
When the payment is received, the payment (or credit memo) application triggers the recording of cash and billing entries from a ledger perspective. The journal run will journalize both billing documents and the payment or credit memo application events:

Dr. Cash  Cr. Accounts Receivable Resulting in an immediate balance of 0 in Accounts Receivable.
Dr. Accounts Receivable  Cr. Deferred revenue

Pre-requisites of cash-based accounting implementation:

The following are the pre-requisites of cash-based accounting implementation:

  • The Zuora tenant must have the Invoice Settlement feature enabled. See Zuora Finance and Invoice Settlement for more information.
  • The enhanced Journal Run functionality must be enabled. See Journal runs for more information.
  • Zuora Revenue must be used for revenue recognition. Legacy Z-Revenue functionalities or reporting do not support cash-based accounting logic.

Current functional limitations:

The following are the limitations of cash-based accounting:

  • Full and partial payments will have the same behaviour: payment will be booked, and delayed invoice entry will be created for the total invoice amount. Partial payment scenarios will need month-end manual adjustments to eliminate the remaining Accounts receivable balance of the invoice.
  • Payment and credit memo application reversal is currently not supported.
  • Only tax-exclusive pricing logic is supported.

Only future accounting periods are available in the drop-down. Cash-based accounting can only be activated from the first day of an accounting period.

Create FX Gain Loss GL Entries

The FX Gain and Loss is created for GL entries if the rule is set to Yes.

Before you enable this feature, you must configure the Home Currency to get GL entries' FX Gain/Loss details. For more information, see Manage currency conversion. To enable this feature, contact Zuora Global Support.