Intercompany Accounting in R12:
How it happens in
11i:
In 11i, intercompany transactions used to be created when a
transaction has happened between two different balancing segments. Consider a
payment for 100 in Payables has happened where the balancing segment for the
liability account is ‘001’ and balancing segment on the cash/cash clearing is
‘002’. For the below illustration let us know the chart of accounts has three
segments Company Code, Account and Cost Center.
Acct Class Acct Credit Debit
--------------- ----------- -------- -------
Cash/clearing 001.xx.xx 100
Liability
002.xx.xx
100
Since the accounting entries are not balanced by the
balancing segments, intercompany lines would be created when posting happens in
GL. The setup for intercompany accounts is to be done at the GL side.
R12 Intercompany
Accounting:
In R12 accounting between two different balancing segments
differs from how it was done in 11i in the following ways.
If a transaction has been created between two different
balancing segments belonging to the same legal entity for the ledger, then
intracompany lines are created for balancing.
If a transaction has been created between two different
balancing segments belonging to the different legal entities for the ledger,
then intercompany lines are created for balancing.
Steps for
Intercompany setup in R12.
Let us assume the company codes (which is the balancing
segment) ‘001’ and ‘002’ belong to two different legal entities (LE1 and LE2)
under the same ledger.
We will be creating a payment with cash clearing account as
001.xx.xx and liability account as 002.xx.xx
We need to complete the below steps to ensure proper
intercompany accounting entries are created for the above payment.
In the Intercompany accounts setup, two accounts need to be
setup. One is Intercompany receivables account and another is Intercompany
Payables account. The account for receivables should be Asset and account for
payables should be Liability.
Create account ‘0010’ for the account segment corresponding
to Company code ‘001’ and ‘002’ and mark the Account Type as ‘Asset’ in the
qualifier.
Create account ‘0020’ for the account segment corresponding
to Company code ‘001’ and ‘002’ and mark the Account Type as ‘Liability’ in the
qualifier.
Create the below four accounting combinations.
001.0010.00
001.0020.00
002.0010.00
002.0020.00
Go to Accounting setup manager.
Query for the ledger
Under the setup step for the primary ledger, click on the
update option for the Intercompany Accounts.
Click on define relationship for the legal
entity LE1. Under the intercompany accounts section, click on Add Another Row.
Give the transacting balancing segment value as ‘001’, trading partner legal
entity as ‘LE2’ and trading partner balancing segment value as ‘002’.
Click on Define Accounts.
Give the intercompany receivables account as 001.0010.00 and
intercompany payables account as 001.0020.00.
Note: The start date on the intercompany receivables and
payables account should be before the transaction date, else Create Accounting
would not be able to find the correct intercompany account.
The above steps need to repeated for the legal entity LE2.
Click on define relationship for the legal entity LE2. Under
the intercompany accounts section, click on Add Another Row. Give the
transacting balancing segment value as ‘002’, trading partner legal entity as
‘LE1’ and trading partner balancing segment value as ‘001’.
Click on Define Accounts.
Give the intercompany receivables account as 002.0010.00 and
intercompany payables account as 002.0020.00.
Test the Intercompany
Account setup:
Create an invoice ‘Test Inter1’ with the charge account as
‘002.xx.xx’ and liability account as ‘002.yy.yy’. Validate and account the
invoice.
Pay the invoice using a bank account where pooled account is
not enabled. The cash account setup for the bank account is ‘001.xx.xx’.
Account for the invoice. The accounting entries created for
the payment would be as follows
Acct Class Acct Credit Debit
------------- ------------- ------------ ------------
Cash 001.xx.xx 100
Liability 002.xx.xx
100
Intercompany 001.0010.00 100
Intercompany 001.0020.00 100
This is the basic setup required for intercompany in SLA.
Please add in your suggestion for any modification/comments.
