The netting entries are created against each line for the revenue contract that is eligible for the netting process.
The MJE functionality is used to book the entries for the netting amount.
The ALLOW_NETTING_PROCESS profile is set to Yes to enable the netting process.
The NETTING_PROCESS_LEVEL profile is specified to determine whether the netting process is done at the application level or transaction line level.
To include MJE lines in the revenue contract for CA/CL netting, the NETTING_RC_MJE profile is set to Yes.
If the netting process is to be done at the application level, the Contract Asset and Contract Liability accounts must be assigned to the revenue book for each company code.
The Include In Netting switch is toggled to Yes for each account that will participate in the netting process.
If the recognized revenue amount is more than the invoice amount (Cr - Dr < 0), the revenue contract is in CA position.
If the recognized revenue amount is less than the invoice amount (Cr - Dr > 0), the revenue contract is in CL position.
In the following scenario, the transaction currency of all lines is the same. The lowest common currency is transaction currency, USD. The net contract liability amount (Cr - Dr) in USD is -1000, which is negative. This revenue contract is eligible for netting.
In the following scenario, all the lines have the same functional currency. The lowest common currency is functional currency, USD. The net contract liability amount in USD is -1250, which is negative. This revenue contract is eligible for netting.
In the following scenario, the transaction currencies of the lines are all different. As a result, the reporting currency is used in netting. The net contract liability amount in reporting currency is -700, which is negative. This revenue contract is eligible for netting.
If Cr - Dr = 0, no accounting entry is created for the line.
If Cr - Dr > 0, the CA account gets credited and the balance sheet account type is Debit.
If Cr - Dr < 0, the CA account gets debited and the balance sheet account type is Credit.
For example, there is one revenue contract 121 in the system.
When netting is done at the application line, the top-sided journal entries are created for the CA amount.
For example, there is only one revenue contract 121 in the system.
After MJE is approved, the following schedules are created.