Intercompany Eliminations · Track 5 · Tutorial 4 of 9

Eliminate management charges

Head office charges the subsidiaries for management, shared services or the use of a brand. The charges recur on the same accounts every month, so a rule usually clears them without anyone touching them.

You will needManagement Charges switched on and the accounts mapped, as in the Set up intercompany track.

By the endCompany A’s management fee to Company B cleared every month by a rule, with its royalty reported under a type of its own.

1Know what to eliminate

Company A charges Company B a management fee of SGD 5,000 a month. Company B books it in AUD: AUD 5,594.00 in October, SGD 5,012.22 at 0.8960.

Company A’s SGD 5,000 management fee and Company B’s AUD 5,594 expense, cleared by a Method 1 rule at Company A’s amount — Cleared at Company A’s amount.

Company A’s invoice is the figure both companies work from, so Method 1 suits it: it clears both sides at Company A’s amount, as long as Company B’s agrees within a tolerance.

2Clear it with a rule

Set up the rule as in Method 1: eliminate at the From side’s amount, and its tolerance as in Set the tolerance. A month whose difference is beyond the tolerance waits in Elimination Review.

Unpaid fees	The receivable and payable the fee leaves behind are a separate balance — see Eliminate trade receivables and payables.
Mixed accounts	If an account also holds charges to or from outside the group, eliminate from the invoices and bills instead — see Eliminate from invoices and bills.

3Report royalties and other charges apart

Your Group wants Company A’s royalty seen apart from the management fee, so it has a type of its own, Royalties, that works like Management Charges — see Switch on and add intercompany types. Shared IT, HR or finance services can be given types of their own the same way.

Under Management Charges, and any type that works like it, an entry’s lines can use Revenue, Expense, Accounts Receivable and Accounts Payable accounts.

4Check the month

Open the group’s Profit & Loss for October with Show Entities on.

Check

The group column shows nothing on the management fee income line, and only the small exchange difference, 12.22, on the expense line.

5If something goes wrong

A month is held in Elimination Review	Company B’s amount is beyond the tolerance. If it hasn’t booked the fee yet, reload it once it has.
Royalties isn’t in the Intercompany menu	Management Charges is switched off. A type of your own is listed only while the type it works like is on.
… cannot be used in this elimination type.	The account is Other Income or Other Expense. Use Other Income / Expenses, or a type of your own that works like it.

Want more detail? See the documentation

Auto Eliminations Intercompany Types Elimination Entries

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