I recently installed asterisk and trying to get it working. My X-Lite phones are registered but i cant make calls between two phones. I only modified sip.conf & extensions.conf do i need to modify any other any other file as well.
[root@asterisk1 asterisk]# cat /etc/asterisk/extensions.conf
[globals]
PHONE1=SIP/1234
PHONE2=SIP/1111

[macro-oneline]
exten => s,1,Dial(${ARG1},20,t)
exten => s,2,Voicemail(u${MACRO_EXTEN})
exten => s,3,Hangup
exten => s,102,Voicemail(b${MACRO_EXTEN})
exten => s,103,Hangup

[local]
exten => 1234,1,Macro(oneline,${PHONE1})
exten => 1111,1,Macro(oneline,${PHONE2})

Sip.conf
[PHONE1]
type=friend
context=default
regexten=1234
callerid="User1" <1234>
host=dynamic
disallow=all
allow=ulaw

[PHONE2]
type=friend
context=default
regexten=1111
callerid="User2" <1111>
host=dynamic
disallow=all
allow=ulaw

I am getting the following error:
[Jul 7 16:54:52] NOTICE[27657] chan_sip.c: Call from 'PHONE1' to extension '1111' rejected because extension not found.

SIP Debug:

--- SIP read from UDP://10.16.103.244:35672 --->
INVITE sip:1111@10.16.103.173 SIP/2.0
Via: SIP/2.0/UDP 10.16.103.244:35672;branch=z9hG4bK-d8754z-443f1d4698659d5a-1---d8754z-;rport
Max-Forwards: 70
Contact: <sip:PHONE1@10.16.103.244:35672>
To: "1111"<sip:1111@10.16.103.173>
From: "1234"<sip:PHONE1@10.16.103.173>;tag=5c117172
Call-ID: ZGQyMTVkYmEzODI4MjI2YTQwZDUwZTAxZGRhZmIwODc.
CSeq: 1 INVITE
Allow: INVITE, ACK, CANCEL, OPTIONS, BYE, REFER, NOTIFY, MESSAGE, SUBSCRIBE, INFO
Content-Type: application/sdp
User-Agent: X-Lite release 1103d stamp 53117
Content-Length: 267

v=0
o=- 6 2 IN IP4 10.16.103.244
s=CounterPath X-Lite 3.0
c=IN IP4 10.16.103.244
t=0 0
m=audio 26956 RTP/AVP 107 0 8 101
a=alt:1 1 : RbbV/Xv3 90+Yl1m3 10.16.103.244 26956
a=fmtp:101 0-15
a=rtpmap:107 BV32/16000
a=rtpmap:101 telephone-event/8000
a=sendrecv

<------------->
--- (12 headers 11 lines) ---
== Using SIP RTP CoS mark 5
Sending to 10.16.103.244 : 35672 (NAT)
Using INVITE request as basis request - ZGQyMTVkYmEzODI4MjI2YTQwZDUwZTAxZGRhZmIwODc.
Found peer 'PHONE1' for 'PHONE1' from 10.16.103.244:35672
Found RTP audio format 107
Found RTP audio format 0
Found RTP audio format 8
Found RTP audio format 101
Peer audio RTP is at port 10.16.103.244:26956
Found unknown media description format BV32 for ID 107
Found audio description format telephone-event for ID 101
Capabilities: us - 0x4 (ulaw), peer - audio=0xc (ulaw|alaw)/video=0x0 (nothing)/text=0x0 (nothing), combined - 0x4 (ulaw)
Non-codec capabilities (dtmf): us - 0x1 (telephone-event), peer - 0x1 (telephone-event), combined - 0x1 (telephone-event)
Peer audio RTP is at port 10.16.103.244:26956
Looking for 1111 in default (domain 10.16.103.173)

<--- Reliably Transmitting (no NAT) to 10.16.103.244:35672 --->
SIP/2.0 404 Not Found
Via: SIP/2.0/UDP 10.16.103.244:35672;branch=z9hG4bK-d8754z-443f1d4698659d5a-1---d8754z-;received=10.16.103.244;rport=35672
From: "1234"<sip:PHONE1@10.16.103.173>;tag=5c117172
To: "1111"<sip:1111@10.16.103.173>;tag=as1dc2c5a7
Call-ID: ZGQyMTVkYmEzODI4MjI2YTQwZDUwZTAxZGRhZmIwODc.
CSeq: 1 INVITE
Server: Asterisk PBX 1.6.1.1
Allow: INVITE, ACK, CANCEL, OPTIONS, BYE, REFER, SUBSCRIBE, NOTIFY
Supported: replaces, timer
Content-Length: 0

<------------>
[Jul 7 18:31:22] NOTICE[27657]: chan_sip.c:18160 handle_request_invite: Call from 'PHONE1' to extension '1111' rejected because ext
ension not found.
Scheduling destruction of SIP dialog 'ZGQyMTVkYmEzODI4MjI2YTQwZDUwZTAxZGRhZmIwODc.' in 32000 ms (Method: INVITE)

<--- SIP read from UDP://10.16.103.244:35672 --->
ACK sip:1111@10.16.103.173 SIP/2.0
Via: SIP/2.0/UDP 10.16.103.244:35672;branch=z9hG4bK-d8754z-443f1d4698659d5a-1---d8754z-;rport
To: "1111"<sip:1111@10.16.103.173>;tag=as1dc2c5a7
From: "1234"<sip:PHONE1@10.16.103.173>;tag=5c117172
Call-ID: ZGQyMTVkYmEzODI4MjI2YTQwZDUwZTAxZGRhZmIwODc.
CSeq: 1 ACK
Content-Length: 0

<------------->
--- (7 headers 0 lines) ---
Really destroying SIP dialog 'ZGQyMTVkYmEzODI4MjI2YTQwZDUwZTAxZGRhZmIwODc.' Method: ACK

Sip.conf
[PHONE1]
type=friend
context=default
regexten=1234
callerid="User1" <1234>
host=dynamic
disallow=all
allow=ulaw

Context default does not exist in your extensions.conf so change it to context=local. If it does not work you may come back here.