Sage X3 Core Financials - Day 8 - Understanding Inter-Company Transactions Flashcards
UNDERSTANDING INTER-COMPANY TRANSACTIONS:
In the following Topics in this Lesson, you will learn how to Setup Inter-Company Transactions as well as how to enter an Inter-Company Journal Entry and Customer/Supplier Invoice.
The Topics in this Lesson include:
- Overview of Inter-Company Transactions,
- Setting Up Inter-Company Transactions,
- Entering Inter-Company Journals
- Entering Inter-Company Invoices.
Overview of Inter-Company Transactions:
You can enter Inter-Company Transactions as Journal Entries or Customer/Supplier Invoices.
Inter-Company Transactions are recorded in the Financial Transaction of each Company involved in that Transaction, eliminating the need to enter multiple Entries increasing productivity.
- You can Setup and Process Inter-Company Transactions in the following functions:
– Journal Entries,
– Customer BP Invoices,
– Supplier BP Invoices - The Log File created displays the individual Invoice Numbers created along with the Invoice date.
What are Inter-Company Transactions?
Inter-Company Transactions occur when one Company is involved with another Company in the same Entity.
- These Companies may be parent (Source Company) and one or more subsidiaries (Target Company).
- There can have Multiple subsidiaries or even two divisions of one Entity.
EXAMPLE:
Company: B, Site B1, Legal Insurance, Amount USD300, Description: Using Account Co. B.
Company: A, Site A1, Legal Insurance, Amount USD700, Description: Using Account Co. A.
An Inter-Company Transaction is recorded in the Financial Transactions of both Companies of that Entity.
When are Inter-Company Transactions used?
Inter-Company Transactions can occur for a variety of reasons but they often occur as a result of normal business relations that exist between Companies.
Eg Company APN and Site ASN plus
Company USSST and Site USST1.
- This allows you to record a financial transaction when a Parent Company generates an Invoice for Expense or Revenue that belong to one or more subsidiaries.
Types of Inter-Company Transactions include:
– Services and Expense: Billing from a Profit Center or allocation from a Cost Centre.
– Dividend Payments: Parent Company may need cash from subsidiaries to pay dividends or their own expenses.
– Loans: Centralized at the Parent Company Level where subsidiaries may borrow from the Parent where Interest may or may not be charged.
– Reimbursements: Where Parent Company may arrange and pay for External Services for a Subsidiary.
– Inventory Transfers: Could be Down-Stream sales, which is from Parent to Subsidiary or Up-Stream which is sales from Subsidiary to Parent or Lateral, which is sales from Subsidiary to Subsidiary.
Features of Inter-Company Transactions:
- Ability to designate a Financial Site belonging to a different Company on both a Supplier and Customer Invoice.
- Automatic Generation of Journal Entries in the Source (Parent Company) and the Target (Subsidiary Company) using the offsetting Due to or Due from Account Setup in each Company.
- Inter-Company Transactions are also possible between Legislations.
- Traceability from Inter-Company Invoice to all Journal Entries created.
- Can Modify the Transaction of the Inter-Company Journal in your Financials.
Setting Up Inter-Company Transactions:
- Activate Inter-Company Transactions.
- Allow for Inter-Company Invoice creation.
- Define Inter-Company Account Mapping.
– Activate the INTCO Activity Code through the following Path:
Development > Data and Parameters > Development Setup > Activity Codes,
in order to enter Inter-Company Transactions.
– Select YES for the INTCPYINV Parameter Value for the TRS Chapter and INV Group. Do this through the following Path:
Setup > General Parameters > Parameters Values.
Inter-Company Account Mapping: (GESTCI)
Path: Common Data > General Accounting Tables > Inter-Company Account Mapping.
We use: (GESTCI) Inter-Company Account Mapping, to define the Inter-Company relationship between Companies.
The information defined is used as the basis for the creation of Inter-Company Journal Entries.
– Source Company: Select the Company used to originate the transaction.
– Target Company: Select the Company used to post Transactions from the Source Company.
– Main General Chart: Display the Chart Code for the Accounts associated with the main Ledger for the Source and Target Companies.
– The COA does not have to match between the Target and Source Companies.
– The Fiscal Year and Period do not have to match; however, you cannot post to a prior period or year in the Target Company.
Due From and Due To Accounts:
The program uses the Accounts entered in the Source Mapping and Target Mapping as holding Accounts when processing Inter-Company Transactions.
– Debited Account: Represents Due From Account which is typically an Asset Account and is used as an Inter-Company Receivable Account. It records the Amount Due From another Company. Credited Account: Represents the Due To Account which is typically a Liability Account and is used as an Inter-Company Payable Account. It records the Amount Due To another Company.
- The Source Debit Account (Due From) and Target Credit Account (Due To) are used when recording an Asset to the Source Company and a Liability to the Target Company.
- The Source Credit Account (Due To) and Target Debit Account (Due From) are used when recording a Liability to the Source Company and an Asset to the Target Company.
The Accounts can either be selected at the appropriate Account Field or by selecting a Control/Collective Account at the Control fields.
– If Control Accounts are used, you must select the BP associated with the Source and Target Control Accounts at the Target BP and Source BP fields.
Entering Inter-Company Journals: (GESGIC)
Path: Financials > Journals > Inter-Company Journal Entry
We use, (GESGIC) Inter-Company Journal Entry, to enter and post an Inter-Company Transactions.
For example, you may need to reallocate costs from a parent Company’s Expense Account to the Subsidiary Company’s Expense Account.
- Site: The Site is entered in the Parent (Source) Company.
- Entry Type: Select the Document Type for Inter-Company Transactions. The Sequence Counter associated with this Document Type will automatically generate the Entry Number when the Entry is created.
– When using Multi-Legislation and to avoid any type of Legislation errors, make sure the Document Type and Journal Code do not have a Specific Legislation selected.
- Date: Enter the Accounting Date for all transactions in both the Source and Target Companies.
Inter-Company Account Mapping:
- For each Line Entry, you can select the Site, Document Type, and Journal as well as the appropriate Account to post to at the Main general field.
– You can not select a Site that has not been defined in the Inter-Company Account Mapping.
– The Ledgers used are the main Ledgers defined for the Site Selected.
– You do not Select the Due To or Due From Accounts.
– The Appropriate Accounts are used to balance the entries in each Company based on the Settings defined in the Inter-Company Account Mapping Function.
– Once the entry is posted, the appropriate Journal Entries are made in each Company.
Entering Inter-Company Invoices: (GESBICI & GESBISI)
Path: A/P - A/R Accounting > Invoicing > Customer Inter-Company Invoices or Supplier.
You can also enter Inter-Company Invoices for Revenue and Expenses, similar to Inter-Company Journal entries.
– To enter an Inter-Company Revenue Invoice: use the (GESBICI) Customer Inter-Company Invoices.
– To enter an Inter-Company Expense Invoice: use (GESBISI) Supplier Inter-Company Invoices in the A/P - A/R Accounting Module.
- Although the functions are different, the basic steps for entering and Posting an Inter-Company Invoice is the same.
- Just like entering regular Invoices, you must Select a Site, Invoice Type, and Supplier as well as enter an Accounting Date.
