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Chapter 5: Intercompany Accounting

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CHAPTER 5: INTERCOMPANY ACCOUNTING

Objectives

The objectives are

• Review posting intercompany transactions

• Review setup for intercompany accounting

• Post an intercompany transaction

• Trace an intercompany transaction

Introduction

You can use Intercompany accounting when accounting processes are centralized

for subsidiaries or branch offices. With Intercompany accounting, you can make

a single entry, which posts to multiple companies. Microsoft Dynamics® AX

2009 provides features to help you set up the system, process transactions, and

trace intercompany transactions.

NOTE : Intercompany accounting provides ledger transactions for companies

that transact with each other, including the appropriate due to and due fromtransactions. Whereas, intercompany trade is handled through Trade and Source

where sales order and purchase order documents are generated. Refer to the

Trade and Source training collection for more information on intercompany

trade.

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Financials II in Microsoft Dynamics® AX 2009

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Post Intercompany Transactions

Transactions posted using the Intercompany functionality in Microsoft Dynamics

AX 2009 cause posted activity to update multiple companies. Before you review

setups and processing activity, review the expected results.

Scenario 1

Contoso Entertainment USA (CEU) must pay a voucher for 1,250 U.S. Dollars

(USD), but Contoso Entertainment Consolidation (CEC) will cover the expense

and the 250 USD tax. The daily journal is posted in CEC. The resulting entries

are as follows:

FIGURE 5.1 POSTING RESULTS FOR SCENARIO 1

NOTE : Microsoft Dynamics AX 2009 makes the entries to the Intercompany

accounts in both companies automatically.

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Scenario 2

CEU receives a monthly invoice for the rent of the office it shares with CEC. The

total rent is 1,000 USD. CEU is responsible for 400 USD and CEC is responsible

for 600 USD. CEU makes the payment. The resulting entries are as follows:

FIGURE 5.2 POSTING RESULTS FOR SCENARIO 2

NOTE : With Intercompany, both companies show activity posted to the Office

Rental Fees account.

Intercompany Posting Setup Demonstration

When you use the intercompany accounting daily journal in Microsoft DynamicsAX 2009, transactions posted in one company cause the related transactions to

post automatically in the other company. This occurs because the necessary setup

is complete.

The required setup steps must be completed in both companies. They include the

following:

• Create the necessary accounts in the chart of accounts

• Set up journal names

• Create the posting relationships between companies

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NOTE : The accounts that were created in the chart of accounts for due to/ due

from must have the Account type field set to Balance for the posting to work

correctly.

For more information about how to set up journals and number sequences, refer

to the Financial Series and Introduction training collections.

As soon as the accounts in the Chart of Accounts and the journals are set up, set

up the posting relationships between the companies.

Scenario

Ken is the Controller at Contoso. Contoso recently decided to start using the

intercompany functionality in Microsoft Dynamics AX 2009. Ken must set up

Contoso Entertainment USA (CEU) and Contoso Entertainment Europe (CEE)

for Intercompany accounting.

Chart of Accounts in CEU

Follow these steps to verify the Chart of Account accounts exist and are set up

appropriately.

1. Verify that the company is CEU.

• If you are not in CEU, double-click the company field on thestatus bar.

• Select CEU, and then click OK .

2. Click General ledger, and then click Chart of Accounts.

3. Locate account 130350, Due From CEE (Contoso Europe).

4. In the Account type field, verify the value is Balance.

5. Locate account 211305, Due To CEE (Contoso Europe).

6. In the Account type field, verify the value is Balance.

Journal Names in CEU

Follow these steps to complete the setup for the journal names in CEU.

1. Click General ledger, click Setup, click Journals, and then clickJournal names.

2. Verify that the IntJrn exists for Intercompany transactions.

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Chart of Accounts in CEE

Now, Ken must set up Contoso Entertainment Europe (CEE) with the same

functionality. Follow these steps to complete the setup for CEE.

1. Double-click the company field on the status bar.2. Select CEE, and then click OK .


4. Locate account 1260, due from CEU company.

5. In the Account type field, verify the value is Asset.

6. Locate account 3360, due to CEU company.

7. In the Account type field, verify the value is Liability.

Journal Names in CEE

Follow these steps to verify the setup for the journal name in CEE.

1. Click General ledger, click Setup, click Journals, and then clickJournal names.

2. Verify that the IC journal exists for Intercompany transactions.

Posting Relationship - CEU

Follow these steps to review the posting relationship in CEU.

1. Click General ledger, click Setup, click Posting, and then clickIntercompany accounting.

2. Press CTRL+N to add a line.3. In the Company accounts field, click the arrow to select the

company with which the active (open) company will have

Intercompany transactions - CEE.

4. In the Name field, the value populates based on the Companyaccounts setup.

5. Click the Debit account arrow, and then click the account that will be debited for Intercompany transactions - 130350.

6. Click the Credit account arrow, and then click the account that will be debited for Intercompany transactions - 211305.

7. Click the Journal arrow, and then click the Journal that will be used

- IC.8. Close the Intercompany accounting form.

Posting Relationship - CEE

1. Double-click the company field on the status bar.

2. Select CEE, and then click OK .

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3. Click General ledger, click Setup, click Posting, and then clickIntercompany accounting.

4. Press CTRL+N to add a line.

5. In the Company accounts field, click the arrow to select CEU.

6. In the Debit account field, enter 1260.

7. In the Credit account field, enter 3360.8. In the Journal field, click the arrow to select IntJrn.

9. Close the form.

NOTE : Regardless of the direction of posting between company accounts, both

companies must have intercompany accounts set up for the other company

accounts. Any errors in the setup will cause errors in Validate and Post in the

journals.

Post an Intercompany Transaction Demonstration

After the setup is complete for intercompany accounting, create and post

intercompany transactions. Microsoft Dynamics AX 2009 will create

intercompany entries automatically using the ledger accounts and journals that

are set up.

Scenario

Vince, the Operations Manager at Contoso Entertainment USA (CEU), and

Ellen, the Warehouse Manager for Contoso Entertainment Europe (CEE),

traveled together to a trade show in December 2008. Vince charged both of the

airline tickets (700 USD each) to his credit card.

Create a Journal

Follow these steps to create a journal.

1. Verify that you are in CEU. If you are not, switch companies.

2. Click General ledger, click Journals, and then click General journal.


4. Click the Name arrow, and then click IntJrn.

HINT : When you make the initial entry, you do not need to use the Intercompanydaily journal that was set up - that journal is used in the related company to

record the automatic Intercompany entries. You can initiate an Intercompany

entry from any kind of journal.

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Enter Journal Line

Follow these steps to enter the journal line to record the 700 USD expense.

1. From the Journal form with the new journal entry selected, click theLines button.

2. In the Date field, enter 12/31/2008.

3. In the Account field, enter 601500. This is the account to which theexpense was originally posted.

4. In the Transaction text field, enter December airfare.

5. In the Credit field, enter 700.

6. Click the General tab.

7. In the Offset company accounts field in the Offset account fieldgroup, click the arrow to select the correct company - CEE.

HINT : When you select a company in the Company accounts field, Offset

company accounts field, or both, all companies are available. However, postingwill only work between companies that have intercompany posting accounts set

up.

8. In the Offset account field, enter 6650.

HINT : Post Intercompany transactions to Ledger accounts, Customer accounts,

Vendor accounts, and Bank accounts by using the Offset account type field to

make the selection.

9. Click the Dimension tab.

10. In the Intercompany dimensions field group, click the Cost center arrow, and then click 0407 - Trade shows.

11. Click the Post button, and then click Post. An Infolog form willappear with information about the post process.

12. Click the Close button.

NOTE : When the entry posts, the Infolog form that displays shows that two

vouchers posted, one for each company. This helps verify that the automatic

entry posted in the other company.

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Trace an Intercompany Entry Demonstration

After you make an entry that affects two companies, verify the entry is made to

the correct accounts.

This figure shows which accounts should be affected for each company based on

the previous demonstration.

FIGURE 5.3 EXPECTED POSTING RESULTS FOR SCENARIO

This demonstration shows how to trace the activity in Microsoft Dynamics AX2009.

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Trace the Intercompany Entry through the AccountTransactions form in CEU

Follow these steps to trace the entry in Contoso Entertainment USA (CEU).

1. Select the appropriate company - CEU.


3. Click the line for account 601500, click the View tab, and then clickthe Transactions button.

4. Locate the Intercompany entry. On this form, see the credit entry posted on 12/31/2008 for the 700 USD intercompany transaction.

FIGURE 5.4 ACCOUNT TRANSACTIONS FORM

5. Close the form.

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Trace the Intercompany Entry through the AccountTransactions form in CEE

Follow these steps to trace the entry in Contoso Entertainment Europe (CEE).




4. Click the line for account 6650, click the View tab, and then click theTransactions button.

5. Locate the Intercompany entry.


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Trace the Intercompany Entry through the VoucherTransactions form in CEE

Follow these steps to view the complete journal entry in CEE.

1. Verify that you are in CEE. If you are not, switch companies.

2. Click General ledger, click Inquiries, and then click Audit trail.

3. Click the appropriate journal entry, and then click the Vouchertransactions button.

In the Voucher transactions form, see the 700 USD debit to the Due

to CEU company account and corresponding credit to the Travel

expenses employee account.


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Trace the Intercompany Entry through the VoucherTransactions form in CEU

Follow these steps to view the complete journal entry in CEE.


2. Select CEU, and then click OK.

3. Click General ledger, click Inquiries, and then click Vouchertransactions.

4. Enter 12/31/2008 in the Criteria field for Date.

5. Click the OK button. See the 700 USD credit to the Due from CEE(Contoso Europe) account and the corresponding debit to the Travel

expense account.


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Lab 5.1 - Enter and Post an Intercompany Transaction

Scenario

Ken, the Controller at Contoso Entertainment USA (CEU), received an invoice

for office supplies ordered by Contoso Entertainment Europe (CEE). Record an

entry in CEU that will post the intercompany entry to CEE.

Use the following information to post an entry in CEU using the general journal.

Field Value

Date November 15, 2008

Debit 6300, Office operational expenses

Credit 110180, Petty cash account

Amount 300 USD

Challenge Yourself!

Help Ken enter the data and post the entry.

Need a Little Help?

1. Verify that you are starting in the CEU company.

2. Select CEE on the General tab of the Journal voucher form.

Step by Step

1. Verify that you are in CEU.

• If you are not, double-click the company field on the status bar.


2. Click General ledger, click Journals, and then click General journal.


4. In the Name field, click the arrow to select GenJrn.

5. Click the Lines button.6. Enter 11/15/2008 in the Date field.

7. Click the Account arrow, and then click 110180.

8. In the Credit field, enter 300.

9. Click the General tab.

10. In the Offset company accounts field in the Offset account fieldgroup, click the arrow to select CEE.

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11. Click the Offset account arrow, and then click 6300.

12. Click the Post button, and then click Post.

13. Click the Close button to close the Infolog.

14. Close the Journal form.

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Lab 5.2 - Trace an Intercompany Transaction

Scenario

Ken, the Controller at Contoso Entertainment USA (CEU), wants to verify that

the entry booked for office supplies posted to the appropriate accounts in CEUand CEE.

Challenge Yourself!

Help Ken to trace the entry in CEU and CEE by using the Voucher

Transactions form.

Need a Little Help?

Review the activity in each company.

Step by Step

1. Verify that you are in CEU.

• If you are not, double-click the company field on the status bar.




4. Click the OK button.

5. Locate and review the lines for the Intercompany transaction, andthen close the form.





10. Click the OK button.

11. Locate and review the lines for the Intercompany transaction, andthen close the form.

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Summary

Intercompany accounting can help by providing a single entry point for

transactions that must be recorded to multiple companies. Making transactions

from a single company saves data entry time and provides a guarantee that

transactions affecting multiple companies are recorded in each company. Inaddition, Microsoft Dynamics AX 2009 makes it easy to trace the entries through

the system.

Microsoft Dynamics AX 2009 has the functionality that is required by most

companies that process intercompany transactions. This includes the ability to

easily record intercompany sales orders, purchase orders, and cash

disbursements.

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Quick Interaction: Lessons Learned

Take a moment and write down three key points you have learned from this

chapter

1.

2.

3.

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Ax2009 Enus Finii 05