Intercompany Documents

Intercompany documents record transactions between entities in your corporate group. This article explains how to configure intercompany accounts and create intercompany journal entries.

# What is this page about

This page covers intercompany journal entries: setting up the account rules that drive them, entering a FROM line and its TO lines, checking the net impact before you post, and how elimination removes these amounts from consolidated reporting. Read it if you post transactions between your own entities.

On this page

• What Are Intercompany Transactions?
• Setting Up Intercompany Configuration
• Creating an Intercompany Journal Entry
• Voiding a Posted Entry
• Statuses
• Net Impact Preview
• Entry Detail Tabs
• Filtering the Journal Entries List
• Elimination and Consolidation
• Regulatory and Tax Context
• Best Practices
• Related Articles

# What Are Intercompany Transactions?

Intercompany transactions are financial activities between entities within the same corporate group:

Examples:

• Parent company loans cash to subsidiary
• Subsidiary sells products to another subsidiary
• Division A charges Division B for shared services
• Entity A transfers assets to Entity B

These transactions stay inside the group, so they are eliminated during consolidation.

In Light, one intercompany journal entry writes a separate journal entry for each entity involved: one for the From entity and one for each To entity, linked together. Each side posts to the intercompany accounts set on your rules.

For example: Entity A lends Entity B $100. A's books show a $100 receivable from B, and B's books show a $100 payable to A. Each entity's own reports show the full amount, and in the consolidated view the receivable and payable cancel each other out.

# Setting Up Intercompany Configuration

Before creating intercompany journal entries, configure which accounts are used for intercompany postings. Set up the intercompany receivable and payable accounts in your chart of accounts first, since a rule points to existing accounts.

Admins, Controllers and Auditors can see the rules. Admins and Controllers with access to every entity can add and edit them.

1. Go to Accounting → Accounts
2. Open the Intercompany rules tab, the last tab after Chart of accounts, Account defaults and Payment rounding
3. Click Add intercompany rule in the page header
4. Fill in the fields:

At least one of debit or credit intercompany account must be set. With both empty, Light shows "A debit or credit account is required".

5. Click Create

To change a rule, click its row, edit the fields and click Save.

# Creating an Intercompany Journal Entry

1. Go to Accounting → Journal entries
2. Click Create journal entry, then choose Intercompany from the dropdown
3. Fill in the header fields:

1. Configure the FROM line (source entity):

   • Entity: the originating company entity
   • Account: the GL account
   • Eliminate: whether this line is eliminated at consolidation (Yes or No). Required on every line, and every line in the entry needs the same value
   • Description: optional line note
   • Tax code: optional
   • Debit / Credit amount

2. Configure one or more TO lines (receiving entities) with the same fields. Use + Add line item to add more TO lines.

3. Open the Net impact tab under the lines, which previews the net effect per entity and account in real time as you enter amounts.

4. Click Save to keep as Draft, or Post to finalize.

Good to know: Debit and credit totals are shown at the bottom of the lines table. The entry must balance before it can be posted.

To post, the entry must meet every rule below. If one fails, Light shows a Failed to post intercompany journal entry message and keeps the entry as it is:

• The From entity differs from every To entity
• Debit and credit lines sum to zero
• The entry has at least one To line
• Every line has the same Eliminate value
• Every account falls inside an intercompany rule's account code range
• Every required field is filled in

# Voiding a Posted Entry

If you need to reverse a posted intercompany journal entry:

1. Open the posted entry from Accounting → Journal entries
2. Click Void
3. In the Confirm voiding dialog, click Void. The dialog reads "This action cannot be undone. All individual journal entry postings will be reversed."

The entry's status changes to Void, and Light posts reversing entries in every entity the entry touched. To see the original and its reversal together, go to Accounting → Transactions, filter on the intercompany account and set Entry status to All. The default, Simplified, hides reversed entries.

Void and Delete are available on entries you create. Entries Light creates itself are locked.

# Statuses

Note: If you need to reverse a posted intercompany entry, you can void it. Open the posted entry and click Void in the top-right actions, then confirm in the dialog. This reverses all the journal entry postings that were created when the entry was posted, unwinding the GL impact. Only posted entries can be voided, and draft entries can be deleted instead.

# Net Impact Preview

While a journal entry is in Draft, the Net impact tab updates in real time as you edit lines. It shows the net effect of the transaction per entity and account before you commit.

After posting, the tab shows the actual posted net impact. The tooltip reads:

"Displays the net effect of intercompany transactions. These are reversed via elimination entries to ensure accurate reporting, while this view highlights their original impact."

# Entry Detail Tabs

When viewing an intercompany journal entry, three tabs are available on the right panel:

Under the lines, the Journal overview, Net impact and Log tabs show the entry's lines, its net effect per entity and account, and its history.

# Filtering the Journal Entries List

The intercompany journal entries list can be filtered by:

• Period (defaults to current quarter)
• Valuation date
• Currency
• Status (Draft / Posted / Void)
• Created at

Free-text search is also available.

# Elimination and Consolidation

The Eliminate field on each line and the Eliminate source line toggle in intercompany config determine which lines are flagged for elimination when producing consolidated statements.

At consolidation:

• Lines marked for elimination are excluded from the consolidated GL
• Intercompany receivables and payables offset each other
• Only external transactions remain in consolidated output

Entity-level GL reports still show intercompany amounts in full.

# Regulatory and Tax Context

GAAP / IFRS:

• Intercompany transactions are eliminated in consolidated statements
• Entity-level statements still show intercompany amounts
• Intercompany profits may be deferred (upstream/downstream sales)

Tax:

• Intercompany transactions must be at arm's-length prices
• Transfer pricing regulations apply to significant intercompany amounts
• Documentation required for tax authorities

# Best Practices

• Standardize accounts: use consistent intercompany account naming across entities
• Set up config first: configure account ranges before creating entries so elimination flags apply correctly
• Reconcile monthly: check that intercompany balances across entities agree
• Review net impact: use the Net impact tab to verify the effect before posting
• Document the purpose: use the description field and attachments to record the business reason

# Related Articles

• Multi-entity ledger management
• Creating manual journal entries
• FX revaluations