Defining Intercompany Accounts

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If multiple companies in your enterprise share the same set of books, you can automatically balance intercompany journals. To do this, you define intercompany accounts for different combinations of source, category, and balancing segment value.
When you define your set of books, check the check box, Balance Intercompany Journals in the Set of Books window. General Ledger then creates balancing entries for out of balance intercompany journals that are based on templates you have defined in the Intercompany Accounts window.

You can use an intercompany segment to help you maintain your intercompany accounts. You must define this segment in your chart of accounts structure. The intercompany accounts and balancing options you define in the Intercompany Accounts window can have the following results when you create intercompany transactions:

  • Require a user to specify a clearing company when entering an intercompany transaction in the Journals window.
  • Require all intercompany transactions to balance with the company clearing the intercompany transaction.
  • Require all intercompany transactions to balance against a specific intercompany account.

General Ledger can also balance your intercompany transactions in summary or detail, depending on your business practices.

Define an intercompany account:
Navigate to the Intercompany Accounts window.
1. Specify the Source and Category that apply to the intercompany account(s) you are defining.
Note: When the posting program applies intercompany balancing, it will search for the intercompany account template
that matches the source and category of your journal entry. If the program cannot find an intercompany template with a
matching source and category, the program searches for the intercompany account template for the journal source and
category Other.
If the program cannot find an intercompany template with a matching journal source and category Other, the program will
search for the intercompany template with the journal source Other, and the category Other.

2. Select Summary or Detail Balance from the Balance by poplist. Transaction examples for Summary or Detail balance are listed below.

 
3. Complete the Clearing Company Usage and Default Options tabs.
 
The Clearing Company Usage and Default Options tabs let you specify options for processing intercompany transactions among multiple companies or subsidiaries. The choices you select in these tabs determine how General Ledger automatically creates balancing entries for these types of journals. You can select only one option each from the Clearing Company Usage tab and Default Options tab per source and category combination of intercompany account definitions.

The Always Use Clearing Company option lets you define how clearing companies are applied to all types of transactions as described below. The relationship refers to how many companies are involved on the debit and credit side of the transaction.

  • Single to Single: If you transfer an asset from one company to another, you create a single to single transaction that debits one company and credits another company.
  • Many to Single: If one company charges many companies for engineering services in a single transaction, you create a single to many transaction that debits multiple companies and credits a single company.
  • Single to Many: If many companies transfer inventory items to one company, you create a many to single transaction that debits a single company and credits many companies.
  • Many to Many: If many companies are cross charging one another, you create one many to many transaction that reflects all the business transactions between the many companies. A single transaction debits many companies and credits many companies.
Note: General Ledger determines whether a transaction is a single to many or many to many before applying the associated
balancing options. General Ledger will net multiple journal entry lines for the same balancing segment value before the
determination is made.
 
Clearing Company Usage Tab
Always Use Clearing Company: Choose this option to apply one of the two choices in the Default Options tab; Error Out or Use Default Clearing Company. This Clearing Company Usage option applies to any intercompany transaction you enter whether it involves single to single, single to many, many to single, or many to many companies

Many to Many Intercompany Transactions Only: Choose this option to apply one of three choices in the Default Options tab; Error Out, Use Default Clearing Company, or Use Default Balancing Account. This clearing company usage option applies only when the intercompany transaction involves many companies to many companies.

4. Intercompany Detail Region
You can record your intercompany transactions in detail by defining specific balancing segments and Due From and Due To accounts in the Intercompany Detail region. If you want to use the same account for both debit and credit entries, you must enter the same account in the Due From and Due To Accounts fields.

Balancing Segment Column:
Enter a specific balancing segment or press the Tab key and All Other appears. All Other includes all balancing segment values not explicitly defined.
For example, suppose your balancing segment is defined as your company segment. You have 7 companies in your multicompany organization and you want specific Due From and Due To account when balancing intercompany transactions against companies 1 and 2.
In rows 1 and 2, specify the Balancing Segment Values for companies 1 and 2 in the Company field and the corresponding accounts in the Due From and Due To fields.
Complete row three for your remaining five companies. Press the Tab key to specify All Other in the Company field and complete the corresponding Due From and Due To accounts. In this example, All Other includes companies three through seven.

Due From Account:
Specify a debit balancing account.
Due To Account: Specify a credit balancing account.

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