Depending upon your company and subsidiary business needs, General Ledger offers a number of solutions to automatically account for intercompany transactions within a single set of books.

General Ledger can automatically balance intercompany journals based on accounts you define in the Intercompany Accounts window. General Ledger creates balancing journal lines when you post, using the appropriate intercompany accounts you specify for the source, category, and balancing segment.

For General Ledger to automatically balance intercompany journals, you must enable the Balance Intercompany Journals option in the Set of Books window. (Optional) You can create an intercompany segment in your chart of accounts structure. The intercompany segment shares the same value set as the balancing segment and is used in the account code combination General Ledger creates to balance intercompany journals.

The intercompany balancing segment provides more detail for reporting and reconciliation.

1. Standard Intercompany Balancing
General Ledger can create generic balancing lines against the intercompany accounts that you have defined for specific sources and categories. This method does not track payable and receivable balances for specific trading subsidiaries.
Assume you define the intercompany accounts shown in the table below for a specific source and category:

3. Intercompany Segment Balancing
Instead of using different natural accounts to track intercompany balances, you can use an intercompany segment in your chart of accounts to record the same detail as the enhanced intercompany balancing described above.
 

 

4. Enhanced Intercompany Balancing – Intercompany Transactions with many companies to many companies
The following example shows how General Ledger treats intercompany transactions when many companies are trading with many companies. Assume you create the accounts listed in the following table:

To track receivable and payable relationships among many companies trading with one another, see the clearing company
models below.

5. Clearing Companies
Your organization can designate one company to act as an operational unit for all subsidiary companies in the organization for certain kinds of transactions. Intercompany Balancing in General Ledger supports this kind of operational decision.
For example, company 01 among your subsidiary companies may  provide the accounts payable function for your entire organization. All accounts payable transactions clear through company 01. When you create a clearing company like this, you can:

• Consolidate the accounts payable activities for the entire company
• Automatically balance multi company intercompany transactions
• Track the amounts each individual subsidiary owes to each other subsidiary

You can use enhanced intercompany accounting or the intercompany segment to implement the clearing company model.

 

If you create an intercompany journal and you do not specify the clearing company in the Enter Journals window, the transaction posts against the default balancing segment value you specify in the default clearing company field.

6. Using the intercompany segment in the clearing company model:
Assume you define the accounts, listed in the table below, in the detail region of the Intercompany Accounts window. You choose company 06 as the clearing company.