Interdivision Transfers

Definition of Interdivision Transfers: when merchandise is transferred from one location (division or warehouse) to another with the purpose of the receiving location (division or warehouse) selling the transferred merchandise or using it internally.

Processing an Interdivision Transfer:

A customer and vendor, along with some other information need to be set up properly before a transfer can be done. See document titled: "Add a New Division" in the General Ledger section for complete instructions on what must be done first. The "customers" need to have nine "A"'s in field 13 (Price Type) of the Customer Master record (Task 17 in AR). The A's indicate for the system to reference "Average Cost". Also, by indicating a separate salesperson (field 11) on the Customer Master record will allow the "customers" to be grouped for reporting purposes

For this example, assume that three divisions (locations or warehouses) are involved. Therefore three customers and three vendors would also need to be set up for the corresponding divisions.

Detroit Office = Division 1 Customer # = 1 Vendor # = 1

Madison Office = Division 2 Customer # = 2 Vendor # = 2

Grand Blanc Office = Division 3 Customer # = 3 Vendor # = 3

Enter an order and invoice the "customer" just like a normal customer. The only difference being that the sell price displayed will be the average cost on the item. With the sale amount and the cost amount being the same, there is a net profit of $0.00 - at cost. Since the transaction is at cost, the sale will not inflate profit figures.
All other processing for interdivision transfers is handled automatically by the system.
The inventory of the division transferring the items will decrease.
- As soon as the order is “Invoiced” and the order is completed the division transferring the inventory, the quantity on hand, of the items will decrease.
The inventory of the division receiving the items will increase.
- As soon as the order is “Invoiced” and the order is completed the division receiving the inventory, the quantity on hand, of the items will increase.
When the “Invoiced order holding file” is posted with invoices to customer #’s 1 through 99 paid transactions are automatically created in A/R and A/P:
- In A/R Task #1 Sales entry & editing.
- In A/R Task #2 Cash/Receipts entry & editing.
  - Cash from the interdivision transfers will appear in the "OTHER" column of the Cash Edit List.
- In A/P Task #1 Voucher entry & editing. Vouchers are automatically created. These vouchers are paid with check #999999

Example: Division 01, transferred/invoiced customer 02, the voucher would be for division 02 & vendor #01.

See the document titled: Inter-Division Transfers - Balancing for more details.

PARAMETER TO CONSIDER:

Accounts Receivable (Module 2)
- System management functions (Task 32)
  - Modify parameter files (Sub-task 22)
    - SUB'TOTAL'FLAG=Y
      - Answering Y to this parameter will give a subtotal in the Sales Entry & editing and Cash/Receipts entry & editing for internal (customer #’s 1-99/transfers) & external (regular customer #100-99999) on the edit and postings.

Following is the net effect on the Accounts Receivable to General Ledger Interface (ARTOGL) for a division/location/warehouse transfer:

ACCOUNT DEBIT CREDIT

Accounts Receivable - Trade xxxx

Sales xxxx

(Records "sale" of interdivision transfer)

Cost of Sales xxxx

Inventory xxxx

(Records "cost" of items transferred)

Cash in Bank xxxx

Accounts Receivable - Trade xxxx

(Records "payment" from interdivision)

Following is the net effect on the Accounts Payable to General Ledger Interface (APTOGL) for a division/location/warehouse transfer:

ACCOUNT DEBIT CREDIT

Inventory xxxx

Accounts Payable - Trade xxxx

(Records the interdivision transfer)

Accounts Payable - Trade xxxx

Cash in the Bank xxxx

(Records "payment" on interdivision customer)

After the above entries are recorded and posted, the Balance Sheet accounts have a net effect of zero. The Income Statement accounts reflect a sale and a cost of sale for the same amount. The interdivision Income Statement accounts should be statement coded together in the General Ledger Account Master (Task 17, field 3)

UNPAID TRANSFERS

Normally the interdivision transfers/invoices are automatically paid on the A/R side and the Vouchers automatically paid on the A/P side. A parameter can be set to NOT automatically pay these transfers. The transfer/invoice is handled the same normal way. To set this parameter, go to:

Order Processing (Module 6)
- System management functions (Task 32)
  - Modify parameter files (Sub-task 22)
  - Posting & label options (Option 4), look for:
    - POST'TRANSFERS'PREPAID=
      - Should division transfers post as prepaid Y/N. The default/blank =Y. Choose no only if you want to maintain open payables & receivables to be paid manually or if actual checks are to be written. This might be if divisions have separate checking accounts or are separate companies.
      - If this parameter is set to N, when the “Invoiced order holding file” is posted, the system won’t create any A/R Cash/Receipts entry & editing (Task 2) transactions. So the transfer/invoices will be unpaid. They will need to be manually cleared out each month, either with an A/R adjustment credit memo or a check. If using the A/R adjustment credit memo the same G/L account # must be used on the A/P side. Don’t use any of the major accounts like A/R, A/P, or checking account. It is best in this case to have an A/R- A/P clearing account.
      - If this parameter is set to N, when the “Invoiced order holding file” is posted, the vouchers created in A/P Task #1 Voucher entry & editing, will be unpaid. They will need to be manually cleared out each month, either with a credit voucher or a check. If using the credit voucher, the same G/L account # must be used on the A/R side. Don’t use any of the major accounts like A/R, A/P or checking accounts. It is best in this case to have an A/R-A/P clearing account.

If the transfers are NOT automatically paid the following is the net effect on the Accounts Receivable to General Ledger Interface (ARTOGL) for a division/location/warehouse transfer:

ACCOUNT DEBIT CREDIT

Accounts Receivable - Trade xxxx

Sales xxxx

(Records "sale" of interdivision transfer)

Cost of Sales xxxx

Inventory xxxx

(Records "cost" of items transferred)

If the transfer is NOT automatically paid following is the net effect on the Accounts Payable to General Ledger Interface (APTOGL) for a division/location/warehouse transfer:

ACCOUNT DEBIT CREDIT

Inventory xxxx

Accounts Payable - Trade xxxx

(Records the interdivision transfer)

TRANSFER INVOICES AT ZERO PRICE

A/R Customer master file (Task 17), Field 13 Price type:000000000, type in all zeros for the orders to be at zero price.
This will still transfer the inventory quantity.
These invoices will go into A/R with zero dollar amounts.
The A/P vouchers will NOT be created.

Following is the effect on the Accounts Receivable to General Ledger Interface (ARTOGL) for a division/location/warehouse transfer at zero price:

Cost of Sales xxxx

Inventory xxxx

(Records "cost" of items transferred)

A manual journal entry will need to be posted in the G/L module. Check with your controller/accountant for the specific entry for your company.

Interdivision Transfers - G/L