Their rights and obligations can be enforced through the judicial system. Define a legal entity for each registered business or other legally recognized legal entity for which you intend to record assets, liabilities, expenses, and income, pay transaction taxes, or engage in intercompany transactions. Oracle Fusion General Ledger supports up to three balancing segments. Best practices recommend that a segment represent your legal entity to facilitate your obligation to consider your business transactions vis-à-vis regulators, tax authorities and investors. Accounting for your business means that you need to create a balanced test balance by legal entity. If you include many legal entities in a single ledger, you must: Balance transactions that exceed the boundaries of legal entities through intragroup transactions. Legal entities that employ employees are called legal employers in Oracle Fusion Legal Entity Configurator. You must enter legal employers for work assignments in Oracle Fusion HCM. If your company regularly separates from companies or holds managers accountable for the use of assets, identify the company with a balanced sector value.
If you place each legal entity in a separate accounting account, you do not need to identify the legal entity with a balancing industry value. The importance of using a legal entity in transactions When your legal entities negotiate with each other, you represent them as legal entities and as customers and suppliers in your customer and supplier registers. Use relationships with legal entities to determine which transactions are intra-group and require intra-group accounting. Your legal entities can be identified as legitimate employers and can therefore be used in human capital management (HCM) applications. A legal person is a recognized party whose rights and obligations are established by law. The department is an area of management responsibility, which can correspond to a set of legal entities. If necessary, you can aggregate the results for your departments by legal entities or by combining parts of other legal entities. Define effective date hierarchies for your cost center or legal entity segment in your chart of accounts to facilitate aggregation and reporting by department.
Divisions and legal entities are independent concepts. Your legal entities are required to pay payroll and social security such as Social Security on your payroll. In Oracle Fusion Applications, you can record statutory payroll units for payroll and generate payroll and social security reports for your legal entities. As a legitimate employer, you may have to pay payroll taxes, not only at the national level, but also at the local level. You comply with this obligation by establishing your legal entity as a workplace in the jurisdiction of a local authority. Set up legal reporting units to represent the part of your business with a specific legal reporting obligation. You can also mark these legal reporting units as tax reporting units if the legal entity is required to pay taxes due to establishing a place of business in the jurisdiction. Oracle Fusion Accounting Hub generates balancing items when, in a single journal, the entity segment value does not have a debit credit.
In Fusion, you have an intercompany transactions screen that allows you to manually create intercompany transactions. Alternatively, you can use the creation of intercompany settlement journals, publish changes to intercompany activities by legal entity, to settle and settle intercompany accounts. In Oracle Fusion Applications, you can assign accounting segments to legal entities and then define consolidation rules using your accounting segments. You create a relationship between the definition of your legal entities and their role in your consolidation. For example, a sales order creates an obligation for the legal entity that reserves the order and promises to deliver the goods on the confirmed date. The creation also creates an obligation for the buyer to receive and pay for these goods. In most countries, contract law contains laws that allow government damages to be claimed for both individuals: when you set up legal entities, you can identify them as legitimate employers and legal entities for payroll, making them available for use in Oracle Fusion Human Capital Management (HCM). Legal entitiesA legal entity is a recognized party with legal rights and obligations. Legal persons have the right to own property, the right to act, the responsibility to repay debts and the responsibility to answer to supervisory authorities, tax authorities and owners in accordance with the rules established in the relevant legislation.
Individual legal entities own the assets of the business, record sales and pay taxes on those sales, make purchases and incur expenses and make other transactions.