Intercompany Configuration can be used to consolidate multiple organizations' GL distribution into one master organization GL.
Overview
Available under General Accounting and Analysis, the Intercompany Configuration screen allows you to define all the rules for the intercompany configuration. For each rule, select the GL account and sub account (optional) from the original organization and the receiving GL Account and sub account (optional) from the receiving organization. Every posting to the first GL account will be transferred to the configured master organization GL account.
Business Case
Company ABC owns a subsidiary, Company XYZ. Company ABC processes supplier invoices that contain an expense for Company XYZ. With Intercompany Configuration activated, journal entry postings can be passed into the subsidiary account automatically.
For example:
Main Journal Entry in XYZ Org
| Debit Expense ABC Org | 1,000 |
| Debit Expense XYZ Org | 4,000 |
| Credit Accounts Payable XYZ Org | 5,000 |
Final Entry in XYZ Org
| Debit Intercompany with ABC Org | 1,000 |
| Debit Expense XYZ Org | 4,000 |
| Credit Accounts Payable XYZ Org | 5,000 |
Final Entry in ABC Org
| Debit Expense ABC Org | 1,000 |
| Credit Intercompany with XYZ Org | 1,000 |
The journal entry in XYZ Org will still have a reference to the expense posting to the ABC Org but this does not post to the XYZ accounts. The journal entry in ABC Org must be approved and posted separately from the original journal. This will have a journal entry source of IC – Intercompany.
Configuration
To configure the ability to pass journal entries into subsidiary accounts automatically, there are 4 main steps:
- Create GL Accounts
- Create GL Source
- Setup Intercompany Configuration
- Enable Intercompany Distribution
Create GL Accounts
Create a GL Account for:
- The Asset account in the primary organization to record owings FROM the subsidiary company.
- The Liability account in the subsidiary organization to record owings TO the primary company.
It is recommended that these accounts be set as Control accounts to prevent manual journal entries from being coded directly to them.
To create a GL Account, follow the below steps:
1. From the Main Menu of the organization the GL Accounts is to be added, click the GL Accounts link.
2. On the GL Accounts screen, click the Add button.
3. On the Add GL Account screen, enter the necessary information such as the account description, mask code, account type and level. The account in the primary organization should be set to an Asset account type and the account in the subsidiary organization should be set to a Liability account type.
4. Click OK.
5. Navigate to the other organization and follow the same steps as above to create a new GL Source. To navigate to a different organization, follow the below steps:
- Click on your user name in the Global Navigation Bar and select Open Organization.
- On the Open Organization screen, select the organization you need to work with and click OK.
- A new browser tab will open for the new organization.
Create GL Source
Create a GL Source with the code of "IC" (Intercompany) in each organization. This is for the journal entry created in the second organization when a transaction is coded to it from the first organization.
To create a new GL Source, follow the below steps:
1. From the Main Menu of the organization the GL Source is to be added, click the GL Sources link.
2. On the GL Sources screen, click the Add button.
3. On the Add GL Source screen, enter IC into the Source field and Intercompany into the Description field.
4. Click OK.
5. Navigate to the other organization and follow the same steps above to create a new GL Source.
Setup Intercompany Configuration
Create the Intercompany Configuration rules using the accounts created in the Create GL Accounts step.
To configure the Intercompany rules, follow the below steps:
1. From the Main Menu, click the Intercompany Configuration link.
2. On the Intercompany Distribution screen, click the Add button.
3. On the Add Intercompany Distribution screen, enter the GL Accounts configured in the Create GL Accounts step.
4. Click OK.
Enable Intercompany Configuration
Enable Intercompany Distribution by activating Organization Parameter GL 005. To enable this parameter, follow the below steps:
1. From the Main Menu, click the Organization Master link.
2. On the Organization Master screen, select the primary organization.
3. Click the Parameters button.
4. On the Organization Parameters screen, search for GL (Application) 005 (Code).
5. In the Alphanumeric Value for the GL 005 organization parameter, enter a Y.
6. Click OK.
7. Log out and back into the system to activate the parameter.
Comments
2 comments
Does this allow you to only specify one GL account per organisation? What if I want to replicate a GL in one organisation from another and link them as a intercompany accounts.
From what I have setup it appears that I am only allowed to have one GL per organisation in use. Can someone please clarify is this is the case
0 upvotes
Hi Derek,
Here is an overview of how intercompany distribution works. I would encourage you to reach out to your regional Services Coordinator to set up some time to work with a Financials Consultant to help guide you through this process:
1.) Enable org parm GL005 – Intercompany Distribution Enabled
2.) Configure the intercompany accounts
3.) Automatic distributions (throw distribution schemes) and manual journals may be configured to create journal entries in any organization with an intercompany relationship configured
4.) When an entry is created involving two separate organizations, the intercompany accounts configured will be utilized to balance the entry by organization upon posting of the entry.
Example:
Main Journal Entry in XYZ Org
Debit Expense ABC Org 1,000
Debit Expense XYZ Org 4,000
Credit Accounts Payable XYZ Org 5,000
Final Entry in XYZ Org
Debit Intercompany with ABC Org 1,000
Debit Expense XYZ Org 4,000
Credit Accounts Payable XYZ Org 5,000
Final Entry in ABC Org
Debit Expense ABC Org 1,000
Credit Intercompany with XYZ Org 1,000
Notes:
1. The journal entry in XYZ Org will still have a reference to the expense posting to the ABC Org, but this does not post to the XYZ accounts.
2. The journal entry in ABC Org must be approved and posted separately from the original journal. This will have a journal entry source of IC – Intercompany.
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