Intercompany Journal Entry
Used for transactions between subsidiaries in NetSuite OneWorld.
When to Use
| Scenario | Example |
|---|---|
| Shared services | HQ charges subs for IT services |
| Management fees | Parent charges management fee |
| Loan transactions | Intercompany loans |
| Cost allocations | Allocate shared costs |
| Dividend declarations | Sub pays dividend to parent |
| Inventory transfers | Transfer between sub warehouses |
How It Works
INTERCOMPANY JOURNAL ENTRY FLOW
═══════════════════════════════════════════════════════════════════════════════
PARENT COMPANY (US)
│
│ Management Fee: $10,000
│
┌───────────┴───────────┐
│ │
▼ ▼
SUBSIDIARY A SUBSIDIARY B
(Singapore) (Australia)
$6,000 $4,000
SINGLE INTERCOMPANY JOURNAL ENTRY CREATES:
Parent Company Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ Intercompany Receivable - SG │ $6,000.00 │ │
│ Intercompany Receivable - AU │ $4,000.00 │ │
│ Management Fee Income │ │ $10,000.00 │
└────────────────────────────────┴────────────┴────────────┘
Subsidiary A (Singapore) Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ Management Fee Expense │ $6,000.00 │ │
│ Intercompany Payable - Parent │ │ $6,000.00 │
└────────────────────────────────┴────────────┴────────────┘
Subsidiary B (Australia) Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ Management Fee Expense │ $4,000.00 │ │
│ Intercompany Payable - Parent │ │ $4,000.00 │
└────────────────────────────────┴────────────┴────────────┘
AT CONSOLIDATION - Elimination Entry (Auto-generated):
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ Management Fee Income │ $10,000.00 │ │
│ Intercompany Payable │ $10,000.00 │ │
│ Intercompany Receivable │ │ $10,000.00 │
│ Management Fee Expense │ │ $10,000.00 │
└────────────────────────────────┴────────────┴────────────┘
Result: Intercompany balances eliminated in consolidated view
Intercompany Account Setup
Account Configuration
| Account Type | Eliminate IC Transactions | Include Children |
|---|---|---|
| IC Receivable | Yes | Yes |
| IC Payable | Yes | Yes |
| IC Revenue | Yes | Yes |
| IC Expense | Yes | Yes |
Setting Up IC Accounts
- Create account (e.g., "Intercompany Receivable")
- Check Eliminate Intercompany Transactions
- Check Include Children if parent account
- Assign to appropriate subsidiary
GL Example: Intercompany Loan
INTERCOMPANY LOAN - PARENT TO SUBSIDIARY
═══════════════════════════════════════════════════════════════════════════════
Parent Company lends $100,000 to Subsidiary A:
Parent Company Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ IC Loan Receivable - Sub A │ $100,000 │ │
│ Bank Account │ │ $100,000 │
└────────────────────────────────┴────────────┴────────────┘
Subsidiary A Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ Bank Account │ $100,000 │ │
│ IC Loan Payable - Parent │ │ $100,000 │
└────────────────────────────────┴────────────┴────────────┘
QUARTERLY INTEREST ACCRUAL (5% annual = $1,250/quarter):
Parent Company Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ IC Interest Receivable │ $1,250.00 │ │
│ IC Interest Income │ │ $1,250.00 │
└────────────────────────────────┴────────────┴────────────┘
Subsidiary A Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ IC Interest Expense │ $1,250.00 │ │
│ IC Interest Payable │ │ $1,250.00 │
└────────────────────────────────┴────────────┴────────────┘
At consolidation: Both principal and interest balances eliminate
GL Example: Shared Service Allocation
SHARED SERVICES - IT COSTS ALLOCATED TO SUBSIDIARIES
═══════════════════════════════════════════════════════════════════════════════
HQ IT costs: $50,000/month allocated based on headcount:
- Sub A: 40% (40 employees)
- Sub B: 35% (35 employees)
- Sub C: 25% (25 employees)
Parent Company (HQ) Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ IC Receivable - Sub A │ $20,000 │ │
│ IC Receivable - Sub B │ $17,500 │ │
│ IC Receivable - Sub C │ $12,500 │ │
│ IT Services Income (IC) │ │ $50,000 │
└────────────────────────────────┴────────────┴────────────┘
Subsidiary A Books:
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ IT Services Expense (IC) │ $20,000 │ │
│ IC Payable - HQ │ │ $20,000 │
└────────────────────────────────┴────────────┴────────────┘
(Similar entries for Sub B and Sub C)
Currency Considerations
Multi-Currency IC Transactions
INTERCOMPANY WITH DIFFERENT CURRENCIES
═══════════════════════════════════════════════════════════════════════════════
Parent (USD) charges Sub A (SGD) management fee of $10,000 USD
Exchange rate: 1 USD = 1.35 SGD
Parent Company Books (USD):
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ IC Receivable - Sub A │ $10,000 │ │
│ Management Fee Income │ │ $10,000 │
└────────────────────────────────┴────────────┴────────────┘
Subsidiary A Books (SGD):
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ Management Fee Expense │ SGD 13,500 │ │
│ IC Payable - Parent │ │ SGD 13,500 │
└────────────────────────────────┴────────────┴────────────┘
Note: FX revaluation may create gains/losses at period end
Elimination Process
Automatic Elimination
NetSuite automatically eliminates intercompany transactions when:
- Accounts marked as Eliminate Intercompany Transactions
- Running Consolidated financial reports
- Subsidiaries roll up to same parent
Manual Elimination Journal
For special cases, create elimination journals:
MANUAL ELIMINATION ENTRY
═══════════════════════════════════════════════════════════════════════════════
┌────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────┼────────────┼────────────┤
│ IC Revenue │ $50,000 │ │
│ IC Payable │ $50,000 │ │
│ IC Expense │ │ $50,000 │
│ IC Receivable │ │ $50,000 │
└────────────────────────────────┴────────────┴────────────┘
Subsidiary: Elimination Subsidiary (special non-operating sub)
Best Practices
| Practice | Benefit |
|---|---|
| Use consistent IC account structure | Easier elimination |
| Mark all IC accounts for elimination | Clean consolidated reports |
| Use same memo format | Audit trail |
| Settle IC balances periodically | Avoid large outstanding balances |
| Document allocation methodology | Audit support |
Next Steps
- Statistical Journal - Non-monetary tracking
- Journal Entries Overview - All journal types