Modules»Accounts Receivable»Intercompany Transfers
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Last modified on 12/31/2015 12:37 PM by User.

Intercompany Transfers

Intercompany transfers occur when merchandise is transferred from one location/division to another with the purpose of the other location/division selling that merchandise.

 (NOTE: If a new location was just obtained, please contact us.  First, there is a licensing issue involved when a new division/location is added.  Second, General Ledger accounts must be added to accommodate the transfers and for the proper allocation of inventory, sales, etc. to the appropriate division/location.  And third, some programming is required to address the issues that arise from Intercompany transfers and additional division/locations.)



  • First, setup a customer (using numbers 1-99 only) and a vendor (using numbers 1 - 99 only) in sequence with the division number. Example:
    • Detroit office is Division 1, the Customer and Vendor number for this office should be 1
    • Madison Heights office is Division 2, the Customer and Vendor number for this office should be 2
    • Grand Blanc office is Division 3, the Customer and Vendor number for this office should be 3
    • Set up the "customers" with a Price Type (field 13) of nine "A"'s which is the "Average Cost".  A suggestion is to set the salesperson number to "50 - House Account" for the customers.
  • Second, once the customer is set up, using the ‘shipping’ division, go to the "Order Processing" module and enter an "order", with the customer number being the ‘receiving’ division and enter all the merchandise that will be transferred. Invoice just like a normal customer would be invoiced. The difference being, the sell prices will display the average cost on the item for a net profit of $0.00, (i.e. "at cost").

All other processing is taken care of by the system.

The inventory from the shipping division is reduced and the receiving division's inventory is increased.

The following is the net effect on the Accounts Receivable to GL interface for a warehouse transfer:

  • Accounts Receivable - Trade -             DEBIT
  • Sales -                                                             CREDIT
    • Records intercompany transfer.
  • Cost of Sales -                                     DEBIT
  • Inventory -                                                       CREDIT
    • Records cost of items transferred.
  • Cash in Bank -                                     DEBIT
  • Accounts Receivable - Trade -                         CREDIT
    • Records payment from intercompany.


The following is the net effect on the Accounts Payable to General Ledger Interface, for a warehouse transfer:

  • Inventory -                                           DEBIT
  • Accounts Payable - Trade -                              CREDIT
    • Records intercompany transfer.
  • Accounts Payable - Trade -                  DEBIT
  • Cash in Bank -                                                 CREDIT
    • Records payment on intercompany customer.


All of the debits and credits are for the same amount.  After the above entries are recorded, the net effect on the Balance Sheet accounts is zero. The Income Statement accounts reflect a sale and a cost of sale for the same amount. The intercompany Income Statement accounts should be statement coded together in the General Ledger Master file. (i.e. in the cost of sales area.)



Order Processing Module:

At end of each day after all invoicing has been done:

Print Daily Checkout/Summary (Task 11 in the OE module), Daily Checkout Summary (Open Order file) - Sub-task 1

  • This prints a handy report that shows the break down in sales, transfers, etc.



At the beginning of the next day:

Print Daily Checkout/Summary (Task 11 in the OE Module), Daily Checkout Summary (Holding file) - Sub task 2.

  • This prints the same report as above.


Print Invoiced Order Edit List (Task 2 in the OE Module), - Subtask 4.  Report selections would be: yesterday’s date, ALL divisions, starting customer # 1, ending customer # 99.  Look for the page that has the G/L account #’s or the page that has the salesman #’s.  Both these pages have a column for sale and a column for cost.  These two columns should be the same.  If they are NOT the same the individual invoices need to be found and fixed BEFORE Posting.  Once they are all correct, you can either POST these with their individual divisions, or all together.


Accounts Receivable Module:

Daily balancing -

Sales Entry & Editing (Task 1), Edit/Sales Posting Journal (Sub-tasks 4 & 5)

  • Each edit list will show totals, which INCLUDE both "normal" sales AND intercompany sales.
  • However, the actual "normal" sales for the day are the total on the sales edit MINUS the intercompany transfers. WRITE this dollar amount on each Posting journal.
  • The figures should match with the Sales column and Transfer column figures on the Daily Checkout /Summary report ran from above.
  • The total column from the Daily Checkout/Summary report ran above should match the totals on the sales edit list.

Cash/Receipts Entry & Editing (Task 2); Edit/Cash Posting Journal (Sub-tasks 4 & 5)

  • Cash from the intercompany transfers will show up in the "Other" column of the cash edit list.
  • The sub-totals should already be split on each cash edit and post


Month End Balancing

1. Sales History (Task 19); Print Selected History Records (Sub-task 4)

  • Print report for the intercompany customers only. (i.e. customers #1-99)
  • Print the same report for Customer #'s 101 and up. This will exclude the intercompany transfer customers. This figure is the actual sales for the month.

 2. Cash/Receipts History (Task 20), Print Selected History Records (Sub-task 4)

  • Print report for the intercompany customers only.(#1 - 99)
  • Print report for Customer #'s 101 and up. This will exclude the "money" from the intercompany transfer customer. This is the actual money that went into the bank and should be compared with the sum total of all the deposit tickets to the bank.

3. System Management Functions (Task 32); Generate A/R to G/L Interface (Sub-task 3)

  • The Sales Part of the Interface
    • The Intercompany Transfer Sales can be included in the DEBIT column dollar numbers. (Accounts Receivable)
      1. To get the Debit to Accounts Receivable for the Intercompany Transfer Sales to go to a separate A/R G/L account #, set that up in the Interface Parameter.
    • One way to get the actual "normal" sales for the month, look on the CREDIT side and total up the sales.  The Intercompany sales will have different sales G/L account #’s.   The middle two digits may be the division they are sold to.  Or the whole account # may be different.  
    • Subtract that total from the DEBIT total (Accounts Receivable - Trade) and this figure is the actual sales dollars.
  • The Cash Part of the Interface
    • The total Cash deposited in the bank should be the DEBIT dollar figure in the Cash in Bank line(s) MINUS the intercompany dollars.
    • The intercompany dollars are the same number as the intercompany Sales Total above.

The interface has been programmed to automatically give the sub-totals of the real ("normal", "actual") sales and the intercompany process automates it all, so there is no need to have to figure out the totals separately.


Accounts Payable Module:

1. Voucher Entry & Editing (Task 1); Edit List/Voucher Posting Journal (Sub-tasks 4 & 5)

  • Print report, all Intercompany transfer vouchers will show up on the edit list as prepaid with check # 99999 .
  • To get actual dollars vouchered on the voucher edit list, take the total and subtract the intercompany prepaids.
  • On each Voucher Posting Journal, hand-write a sub-total for the intercompany vouchers and a sub-total for the rest.

2. Check Account (Task 20); Print Selected Check Records (Sub-task 4)

  • Print report, the Intercompany vouchers will show up on the prepaid section. They will all have the check number 99999.
  • The actual check dollars written will be the totals MINUS the total of the intercompany check # 99999.
  • The CREDIT side (Prepaid and Regular Checks) dollar amount INCLUDES the totals of the Intercompany Check #99999.
  • Subtract out the dollar value of check numbers 99999 to get the actual dollars paid out of the checking account.

3. Voucher History (Task 19), Print Selected History Records (Sub-task 4)


  • Print a voucher history for the inter-company vendors only (numbers between 1 - 99), this will give the totals to subtract.

  • Print a voucher history for Vendor with numbers 101 and up, this will give the "normal" accounts payable totals.

  • The DEBIT side (Increase in Accounts Payable) dollar amount includes the intercompany amounts. Subtract the dollar value of the intercompany amounts to get the actual increase in accounts payable.


The interface has been programmed so sub-totals will print for the intercompany and "actual" (normal)payable totals, so there is no need to have to figure out the totals separately.



1. Post vouchers every day that there are intercompany transfers.

2. Force a check register every day that there are intercompany transfers.

3. VERY IMPORTANT: The Sales and Cash Posting Journals for each day of intercompany transfer dollar amounts should be exactly equal to the Voucher Posting and Check Registeintercompany dollar amounts.

  • What this means is : The "other" dollar amounts on the Cash Posting journal should be equal to the total of Check # 99999 that goes in Cash in A/R module comes out as Check # 99999 in the A/P module. The net effect of money going in and out is thus ZERO.


Subject: Performing division transfers and inter-division billing


Company has 2 stores - #1 and #2 (Stores 1 and 2 are division 1 and 2 respectively). Store 1 receives orders for service and repair jobs. Store 1 however, does not have the ability to perform repair. Store 1 forwards the job to store 2 for the work to be done.

What is the right operational process to follow?


Any correct process will involve some amount of additional work. It is important to recognize that both stores should be fairly compensated in terms of revenues and profits and also that inventory should be relieved and applied accurately.

The following process achieves this:

1. On receipt of the repair job, store 1 opens an order (#Order A) for the customer without any line items (or a generic line item) and includes memo notes on the description of repair.

2. Store 1 forwards work order #Order A and the defective equipment to Store 2.

3. Store 2 opens an order (#Order B) on the system and enters '1' for the customer number. The system now recognizes that this is an inter-divisional billing and that the customer on #Order B is Store 1. Store 2 also enters the order number for #Order A provided by Store 1 as the purchase order number on order #Order B.

4. Store 2 then completes the repair and invoices #Order B. By invoicing the order, the computer relieves any inventory from Store 2 and receives it into the inventory of Store 1.

5. Store 1 now enters the line items on #Order A as they appear on #Order B and invoices the order. This further relieves inventory from Store 1, since it is now effectively sold to the original customer.

6. A report can be run at the end of each month to determine the amount of repair work that Store 1 gives to Store 2 and apply any adjustments that is seen fit to recognize the contributions of the individual stores.