Chapter 5: Intercompany Accounting

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 from
transactions. 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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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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Chapter 5: Intercompany Accounting

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 Dynamics
AX 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 the
status bar.

2.
3.
4.
5.
6.

Select CEU, and then click OK.

Click General ledger, and then click Chart of Accounts.

Locate account 130350, Due From CEE (Contoso Europe).
In the Account type field, verify the value is Balance.
Locate account 211305, Due To CEE (Contoso Europe).
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 click
Journal names.
2. Verify that the IntJrn exists for Intercompany transactions.

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Chapter 5: Intercompany Accounting

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.
2.
3.
4.
5.
6.
7.

Double-click the company field on the status bar.

Select CEE, and then click OK.
Click General ledger, and then click Chart of Accounts.
Locate account 1260, due from CEU company.
In the Account type field, verify the value is Asset.
Locate account 3360, due to CEU company.
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 click
Journal 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 click
Intercompany 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 Company
accounts 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 click
Intercompany 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.
3. Press CTRL+N to add a line.
4. Click the Name arrow, and then click IntJrn.
HINT: When you make the initial entry, you do not need to use the Intercompany
daily 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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Chapter 5: Intercompany Accounting

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 the
Lines button.
2. In the Date field, enter 12/31/2008.
3. In the Account field, enter 601500. This is the account to which the
expense 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 field
group, 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, posting
will 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 will
appear 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 AX

2009.

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Chapter 5: Intercompany Accounting

Trace the Intercompany Entry through the Account
Transactions form in CEU
Follow these steps to trace the entry in Contoso Entertainment USA (CEU).
1. Select the appropriate company - CEU.
2. Click General ledger, and then click Chart of Accounts.
3. Click the line for account 601500, click the View tab, and then click
the 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 Account
Transactions form in CEE
Follow these steps to trace the entry in Contoso Entertainment Europe (CEE).
1.
2.
3.
4.

Double-click the company field on the status bar.

Select CEE, and then click OK.
Click General ledger, and then click Chart of Accounts.
Click the line for account 6650, click the View tab, and then click the
Transactions button.
5. Locate the Intercompany entry.

FIGURE 5.5 ACCOUNT TRANSACTIONS FORM

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Chapter 5: Intercompany Accounting

Trace the Intercompany Entry through the Voucher
Transactions 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 Voucher
transactions 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.

FIGURE 5.6 ACCOUNT TRANSACTIONS FORM

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Trace the Intercompany Entry through the Voucher
Transactions form in CEU
Follow these steps to view the complete journal entry in CEE.
1. Double-click the company field on the status bar.
2. Select CEU, and then click OK.
3. Click General ledger, click Inquiries, and then click Voucher
transactions.
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.

FIGURE 5.7 ACCOUNT TRANSACTIONS FORM

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Chapter 5: Intercompany Accounting

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.

Select CEU, and then click OK.

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

journal.
3. Press CTRL+N to add a line.
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 field
group, click the arrow to select CEE.

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11.
12.
13.
14.

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Click the Offset account arrow, and then click 6300.

Click the Post button, and then click Post.
Click the Close button to close the Infolog.
Close the Journal form.

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Chapter 5: Intercompany Accounting

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 CEU
and 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.

Select CEU, and then click OK.

2. Click General ledger, click Inquiries, and then click Voucher

transactions.
3. Enter 11/15/2008 in the Criteria field for Date.
4. Click the OK button.
5. Locate and review the lines for the Intercompany transaction, and
then close the form.
6. Double-click the company field on the status bar.
7. Select CEE, and then click OK.
8. Click General ledger, click Inquiries, and then click Voucher
transactions.
9. Enter 11/15/2008 in the Criteria field for Date.
10. Click the OK button.
11. Locate and review the lines for the Intercompany transaction, and
then 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. In
addition, 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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Chapter 5: Intercompany Accounting

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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