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Multi-Entity Ledger Management

For companies with multiple entities (subsidiaries, branches, operating divisions), Light maintains separate ledgers per entity. This article explains multi-entity GL management and consolidation.

What is this page about

This page covers running several entities in one Light company: how entities are set up, how documents post to a specific entity's ledger, how intercompany entries and eliminations work, and how to report on one entity or on the group. Read it if your company has subsidiaries, branches, or divisions.

On this page

  • Multi-Entity Overview
  • Entity Structure
  • Chart of Accounts per Entity
  • Posting to Entities
  • Intercompany Transactions
  • Creating Intercompany Entries
  • Entity-Level Reporting
  • Consolidated Reporting
  • Intercompany Elimination
  • Multi-Currency Considerations
  • Selecting entities in reports
  • Transfer Pricing
  • Allocations Between Entities
  • Minority Interests
  • Equity Accounting
  • Segment Reporting
  • Best Practices
  • Related Articles

Multi-Entity Overview

A multi-entity company has multiple operating units:

  • Subsidiaries: separate legal entities, each with its own tax ID
  • Branches: operating units of the same legal entity
  • Divisions: internal business units

Each entity:

  • Has its own company entity record
  • Maintains its own ledger, with GL accounts assigned from the company chart of accounts
  • Posts transactions independently
  • Reports separately and consolidated

Entity Structure

Set up entities in Settings (gear icon) → Entities. Each entity has:

  • Display name: the name shown throughout Light
  • Legal name (required): the registered name, locked once the entity exists
  • Entity code: assigned when you create the entity, for example "001", and used in document numbers. You can renumber it later from the entity's edit view where renumbering is allowed
  • VAT (optional) and Business reg. number (optional)
  • Street (optional), Zip / postcode (optional), City (optional), State, and Country (required)
  • Local currency (required): the entity's operating currency, locked once the entity exists
  • Initial invoice number: the number your invoice sequence starts from
  • E-invoicing (optional): use Add network to register the entity on an e-invoicing network

Each entity's status is Active, Hidden, or Deactivated.

Chart of Accounts per Entity

Light maintains one chart of accounts per company, and each GL account is assigned to one or more entities:

Shared accounts:

  • Assign accounts to all entities so they use the same GL account codes
  • Simplifies consolidation and reporting
  • Standard practice for multinational companies

Entity-specific accounts:

  • Assign an account to selected entities only (unusual)
  • Useful for entity-specific GL accounts (intercompany receivable)
  • More complex to consolidate

Most companies share the chart of accounts across entities.

Posting to Entities

When creating documents, specify the company entity:

  1. Invoice Payable:

    • Specify vendor's entity (which entity receives the bill)
    • Posts to that entity's GL

  2. Invoice Receivable:

    • Specify customer's entity
    • Posts to that entity's GL

  3. Journal Entry:

    • Posts to a single entity's GL
    • Use an intercompany journal entry to span entities (each line specifies its entity)

Documents are always posted to an entity's GL, not to a shared general ledger. Document numbers include the entity code in the format DOCTYPE/ENTITY/NUMBER (e.g., AP/001/000000123), and number sequences run separately per entity and document type.

Intercompany Transactions

When entities transact with each other:

Example: Parent lends cash to subsidiary

  • Parent entity: Debit Intercompany Receivable, Credit Cash
  • Subsidiary entity: Debit Cash, Credit Intercompany Payable

Both entities post the transaction, creating a payable/receivable pair.

Creating Intercompany Entries

For intercompany transactions, create journal entries spanning entities:

  1. Go to Accounting → Journal entries

  2. Click Create journal entry and select the intercompany type

  3. Each line specifies:

    • Company entity
    • GL account
    • Debit/credit amount
    • Eliminate - whether the line is eliminated at consolidation

  4. Entry posts to each entity's GL separately, and Light automatically adds the intercompany receivable/payable offset lines based on your intercompany account configuration

Lines flagged for elimination post to the Elimination ledger, which feeds the eliminations column in consolidated reports.

Note: this auto-offset behaviour applies specifically to the intercompany journal entry type. A plain multi-entity journal entry (not using the intercompany type) just posts the lines you enter, with no automatic offset.

Entity-Level Reporting

Report on individual entity GL:

  1. Go to Planning & Reports → Reports and open a report
  2. In the Entity filter, select a single entity
  3. View that entity's GL, balance sheet, income statement, etc.
  4. Report contains only that entity's transactions

Entity-level reports are useful for:

  • Individual P&L reviews
  • Regulatory filings for subsidiaries
  • Performance evaluation

Consolidated Reporting

Report across all entities:

  1. Go to Planning & Reports → Reports and open a report
  2. Switch on the Consolidated toggle and select the entities to include
  3. The report shows a column per entity, a Subtotal column, an Eliminations column (intercompany offsets), and a Consolidated column
  4. Use the currency selector to choose Group Crcy or Entity Crcy and view all entities in that currency

The Consolidated column is the Subtotal minus Eliminations, which gives you the true group result.

Intercompany Elimination

When consolidating, eliminate intercompany transactions:

Example:

  • Entity A loaned $100,000 to Entity B
  • Entity A GL: Intercompany Receivable $100,000
  • Entity B GL: Intercompany Payable $100,000
  • Consolidated (without elimination): Shows $100,000 both ways (cancels out)
  • Consolidated (with elimination): Shows $0 (properly eliminated)

Elimination removes intercompany amounts to show group transactions with external parties only.

Multi-Currency Considerations

For multi-entity companies with different currencies:

  1. Each entity has a local currency (EUR, GBP, JPY, etc.)
  2. Every transaction posts with three amounts: the document (transaction) currency, the entity's local currency, and the company's group currency
  3. Local and group amounts are converted at posting time using the valuation date rate (official ECB rates, or a custom rate override)
  4. Translation differences are handled via FX revaluation and the currency translation adjustment (CTA) system account

Consolidated reports read the group currency amounts stored on each transaction, so no separate consolidation-date conversion is applied.

Selecting entities in reports

Consolidation groups whichever entities you select, so build the view you need by choosing entities directly:

  • Select several entities together for a combined view
  • Select a single entity for a standalone view

Reports work from the selection you make each time rather than from a fixed group structure.

Transfer Pricing

For entities in different countries, use transfer pricing:

  1. Create journal entries between entities with specific rates
  2. Document transfer price for tax purposes
  3. Report separately for each entity (at transfer price)
  4. Consolidation can show fair value

Light gives you the intercompany entry structure to implement transfer pricing, and leaves the pricing policy itself to you.

Allocations Between Entities

Allocate shared costs across entities:

  1. Parent incurs $100,000 corporate overhead

  2. Allocate 60% to Entity A ($60,000), 40% to Entity B ($40,000)

  3. Create an intercompany journal entry:

    • FROM line: Credit the parent's overhead (or clearing) account $100,000
    • TO lines: Debit Entity A Expense $60,000 and Entity B Expense $40,000
    • Light automatically adds the intercompany receivable/payable offset lines

  4. Posts the allocation to each entity's GL

Use this for cost allocation, management accounting, or regulatory requirements.

Minority Interests

For partial subsidiaries or joint ventures:

  1. Parent owns 70%, outside party owns 30%
  2. Subsidiary posts full GL transactions
  3. Consolidated reports combine 100% of the subsidiary's results
  4. Record the minority (non-controlling) interest share with manual journal entries where required

Equity Accounting

For significant investments in other entities:

  1. Investor company uses equity method

  2. Records initial investment

  3. Posts annual:

    • Share of investee's income
    • Less any dividends received

  4. Increases or decreases investment balance each period

Manual journal entries implement equity accounting; Light provides GL structure.

Segment Reporting

For management reporting by segment (entity, geography, product):

  1. Set up custom properties for segment codes
  2. Post all transactions with segment property
  3. Report filtered by segment
  4. Analyse performance by segment

Entities can be segments, or use custom properties for finer-grained segmentation.

Best Practices

  • Use consistent entity names: standardise your display names so reports stay readable
  • Save your report views: add the entity selections you use most to your report favourites
  • Document allocations: keep notes on why allocations are made
  • Reconcile intercompany: check that payables match receivables
  • Monitor elimination: verify intercompany accounts eliminate properly
  • Report both views: show entity-level and consolidated results
  • Deactivate old entities: set entities you no longer use to Deactivated

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