Intercompany Settlement
      Back to home
      1. Help Center
      2. Accounts Payable
      3. Intercompany Settlement

      Intercompany Settlement in Docyt

      Intercompany settlement refers to the process of reconciling financial transactions between different entities within the same organization or group.

      Intercompany settlement accounts serve as a mechanism for managing a variety of transactions, including the transfer of goods or services, loans, and dividends. The balance in these accounts indicates the net amount that one company owes to or is owed by another, facilitating clear financial relationships between the entities involved.

      Process of Intercompany settlement items in Docyt :

      1. Intercompany settlement of Bank Transaction

      2. Intercompany settlement of Accounts Payable

      3. Intercompany settlement in QuickBooks
      4.  Settlement Items In Expense Management

      📖 Briefing :

      1. Intercompany settlement of Bank Transaction:

      Payment made by Parent company, but expenses need to be split among child company.

      Consider a scenario where a payment is made by the parent company, but the expense needs to be shared among its child companies. The process of intercompany settlement of bank transactions begins in the Reconciliation Center module. Here, you'll find these transactions initially listed under ‘Uncategorized Transactions’.


      Step 1: The payment of $500 made through the bank will first appear as an uncategorised transaction in A company (Hass & F1)'s account, as illustrated in Figure

      Step 2: As an account manager, your task is to divide this expense among the two companies. Now, fill in the 'Business Name' fields for each split, select the appropriate chart of account, and enter the equal amount - $250 - in each 'Amount' field, as demonstrated in Figure

       

      Step 3: After categorizing, a Journal Entry would start reflecting in the other Company name ('My Cool Biz')

       

      Note: There will be no requirement to conduct a settlement in the Expense Management module after the expenses are being divided between the parent and child companies.

       

      2. Intercompany settlement of Accounts Payable (Invoice): 

      Vendor raised invoice to parent and payment made by Parent company.

      Consider a scenario involving two companies, Startup11 and Homely Designs & Manufacturing, both owned by the same individual. In this case, Startup11 will make a payment of $500 to the vendor KFC on behalf of both itself and Homely Designs & Manufacturing. An invoice will be generated under the parent company, Startup11, to account for the payment made for both companies. As a result, the total amount of $500 needs to be accurately settled and recorded in the financial records of both entities.The process that accounts manager need to follow for settlement of this intercompany transaction in Docyt is as follows:

      Step 1: Upload invoice in AP module of Startup11 by adding the invoice in queue.

      Step 2: After uploading the invoice, split the amount as per the payment made,i.e, $250 each in both the business name and save to proceed.

      Step 3: Once the Invoice is in ‘Verification’ stage click and ‘Mark as Verified’ and it will create the Journal Entry in Other Company 'Homely Designs & Manufacturing'.

      A Journal Entry ID is shown under caption of "Intercompany" below invoice details in source business.

      Step 4: An automatic Journal Entry would pass in the other business ‘Homely Designs & Manufacturing’

       

      The journal entry would get created in the books of Homely Designs & Manufacturing also a link would be attached in the Memo which will take directly to the attached invoice.

       

      There will be no need to settle the invoice in Settlement Items of Child Company ‘Homely Designs and Manufacturing’. However it will show the previous history of settlement items.

       

      bookmark When the Books are Not Locked in Both Businesses A & B:

      • If the source invoice/receipt/transaction is edited, the respective Docyt & QBO journal entry will be deleted, and a new journal entry with the modified details will be created upon the next verification of the invoice.

      • If the source invoice/receipt is deleted, the corresponding Docyt & QBO journal entry will also be deleted from the other business.

      • If the source invoice is marked as Do Not Pay, the corresponding Docyt & QBO journal entry will also be deleted from the other business.

      • If the source invoice is merged, the journal entry for the original source invoice will be deleted.

      bookmark If Books Are Locked in Business B:

      • An invoice with splits in Business A cannot be verified, edited, deleted, marked as Do Not Pay, or merged. An error message will appear stating: “Action cannot be completed on this invoice due to inter-company splits. One or more of the involved businesses has their books locked.”.

      • A receipt with splits in Business A cannot be approved, edited, or deleted. An error message will appear stating: “Action cannot be completed on this invoice due to inter-company splits. One or more of the involved businesses has their books locked.”.

      • A transaction with splits in Business A cannot be categorised, or edited. An error message will appear stating: “Action cannot be completed on this invoice due to inter-company splits. One or more of the involved businesses has their books locked.”