Issue/Symptom/Question

What options need to be set for PENTA to create Intercompany entries?

Environment

PENTA for Windows

Resolution/Fix/Answer

There are two system options that influence creating intercompany entries in PENTA; options 107 and 109

OPTION 107 - Use this option to control whether inter-company transactions are allowed between balance sheet OUs. Set this option to "Y" to prevent inter-company transactions. If you do want to allow intercompany entries set this option to 'N'. PENTA will not allow for more than two balance sheet OU's within a single set of transactions like a Journal Entry.

OPTION 109 - allows for the creation of manual intercompany ("arms-length") transactions in PENTA between two Legal entities when set to 'Y'

Rather than directly charging a cost transaction from one OU to another (the procedure that allows PENTA to generate automatic intercompany charges), the “arm’s length” approach allows you to record an invoice to or from a customer or vendor that has been established to represent a related company in your organizational structure. In this scenario, Company A maintains both the payable and the cost, and then bills its customer (which represents Company B) for the cost. Company B, in turn, books the cost to the appropriate job and recognizes a liability to the vendor (which represents Company A), and eventually bills the job’s owner for the cost. Accurate consolidated reporting in this scenario can be a bit involved, since PENTA must eliminate intercompany sales or cost of sales and intercompany AP/AR balances when performing a consolidation between Companies A and B.

PENTA includes the ability to automatically eliminate from financial reports those intercompany cost and revenue transactions that you’ve recorded manually. Such transactions are generated when you enter a payable or receivable issued by an OU to a vendor or customer that represents a related company. This process allows you to generate manual intercompany transactions on an “arm’s length” basis, where cost and billing invoices are generated by one company and then transferred to another.

The manual intercompany accounting capability is controlled through the activation of system–level option 109. In this scenario when Company A performs work on Company B’s job, Company A books the original cost (either to a job or to its own books). It then generates an invoice charging Company B for the cost. Company B books the invoice from Company A to the appropriate job, recognizing the liability. Company B eventually bills the job’s owner for the cost.

Accurate consolidated reporting in this scenario is a bit involved, since PENTA must eliminate intercompany sales/cost of sales, over/under billed, and intercompany AP/AR balances when performing a consolidation

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