An intercompany transaction is a GL transaction or journal entry that affects only one entity, but contains an intercompany code within the GL transaction, as a reference to another entity. The GL transaction posts to one entity only. Use this feature to isolate internal transactions from those that relate to third parties. Intercompany transactions are identified using intercompany codes.

Cross-company transactions span more than one entity, and the associated GL transaction posts to both entities.

Intercompany codes identify organizations that are members of a group of entities that trade with each other. This activity forms the basis for consolidation reporting at period closing, when the financial results of multiple entities are consolidated, and intercompany transactions are eliminated before consolidation.

If an entity is to be used in intercompany and cross-company transactions, select the Intercompany field in its associated Business Relation and define the intercompany code in the field provided.

If required, select the Fixed Intercompany field in the Business Relation to ensure that the intercompany business relation cannot be overwritten when posting transactions to accounts for the entity. See Creating Business Relations for more information on assigning intercompany codes to business relations.

To identify GL accounts used in intercompany transactions, select the Intercompany Account field in Account Create. This makes the Default Intercompany field available. Use this field to assign the intercompany code defined in the business relation of the intercompany entity. See Posting Tab for information on defining intercompany accounts.