A company that is a customer of both Company A and
Company B mails a check for $150,000 to Company A. The check references
the following two invoices: one from Company A for $100,000; one from
Company B for $50,000.
Company A
would record the following journal entry:
Cash ...................................................$150,000
Accounts Receivable ................................................$100,000
Due to Company B .....................................................$50,000
(an accounts payable account)
Company B
would record the following journal entry:
Due from Company A .............................$50,000
(an accounts receivable account)
Accounts Receivable...................................................$50,000
Company A owes Company B $50,000.
To set up the intercompany relationship
for this example, use the GL Intercompany
Tab and select Company A as a source EntityCompany
and select the Due To Company B account, and
then select Company B as a destination EntityCompany
and select Due From Company A account. This setup
creates an association between the two EntitiesCompanies.
When entering the journal entry
to record the intercompany cash receipt, the entry is unbalanced by EntityCompany.
Journal entries must balance by EntityCompany.
When you select the Create IC Trans button for
each journal entry, the system checks the GL Intercompany setup to see
if an intercompany relationship exists. When the system finds the source/destination
relationship, it uses the setup information to create offsetting transactions.
For each journal entry, the additional transactions display at the end
of the list of transactions on the journal
entry tab. The journal entry is balanced by EntityCompany
and can be saved and approved.
Setting
up the intercompany relationships is optional. If you do not want to use
the intercompany option, do not set up. Relationships can be set up at
any time because they do not affect the setup process.
Note
General ledger accounts must already be set up and available
for selection. Refer to Accounts
Overview for more information.
EntitiesCompanies
must already be set up and available for selection. Refer to Entities
OverviewCompanies
Overview
for more information.
Example