RisingERP - Inter-Company Journal Entry

Inter-Company Journal Entry

An Inter-Company Journal Entry facilitates transactions between organizations belonging to the same corporate group.

The creation of an Inter-Company Journal Entry is pertinent when conducting transactions across multiple companies. In this process, you have the flexibility to select the accounts involved in the Inter-Company transactions. An illustrative scenario might involve a company purchasing goods on behalf of another company within the same group.

Inter-Company Journal Entries are generated using the Journal Entry form in RERP. To access the Journal Entry list, navigate to:

Home >> Accounting >> Company & Accounts >> Journal Entry

1. Prerequisites

Before initiating the creation of an Inter-Company Journal Entry, the following prerequisites must be met:

1. At least two Companies

2. How to create an Inter-Company Journal Entry

Proceed with the following steps to create an Inter-Company Journal Entry:

1. Navigate to the Journal Entry list and click on New.
2. Select Entry Type as 'Inter-Company Journal Entry.'
3. Specify the Company that is procuring items on behalf of another company.
4. Add rows for individual accounting entries; only inter-company accounts can be selected here.
5. For each row, provide details such as:
6. The Internal account affected.
7. The amount for Debit or Credit.
8. The Cost Center (if applicable for Income or Expense).
9. Upon submitting the Journal Entry, a button labeled 'Make Inter-Company Journal Entry' will appear in the top right corner.
10. Click on the button. You will be prompted to select the Company against which you intend to create the linked Journal Entry.
11. After selecting the Company, you will be directed to another Journal Entry where relevant fields, such as Company, Voucher Type, Inter-Company Journal Entry Reference, etc., will be pre-populated.
12. Choose the Internal accounts for the second Company in the table.
13. Submit the Journal Entry, ensuring that the total Debit and Credit Amounts match those of the previously created Journal Entry, albeit with opposite debits and credits.

Note: The accounts in the second Journal Entry should mirror the opposite of the actions taken in the first Journal Entry. For example, if Company A is purchasing from Company B, the payment cycle between the two companies would involve the following Inter-Company Journal Entries:

1. Debit Bank Account by 500 and credit Debtors account of Company B by 500.
2. In the Inter-Company Journal Entry, debit Creditors account of Company A by 500 and credit Bank Account by 500.

Additional Considerations:

1. Before proceeding with the Journal Entry, parties must be selected for Creditors and Debtors accounts.
2. A reference link at the bottom will be added to both linked Journal Entries, and it will be removed if either of the Journal Entries is canceled.