Contra Item & Inter-Co

Designing an Adaptable Accounting Cycle for Your Group of Companies

You can design an adaptable accounting cycle for your group of companies which can adapt to change very quickly. Below diagram describes Journal Processing is surrounded by different key elements of accounting. Journal Processing allows you to preset different rules to minimise data entry as well as improve data quality. Contra Account is an optional function but it can support you to innovate the adaptable accounting cycle more efficiently. It enables re-engineering of the traditional implementation of control account and its related subsidiary ledgers in order to maximise the automation of account schedules with on-balance-sheet, off-balance-sheet and post-balance-sheet event.

Document InterCo Path to Automate InterCo Journal Entry

FlexCalc supports you to implement different models of InterCo connection. It is different from the shareholding connection for a holding-subsidiary relationship. Based on an approved InterCo structure of your organisation, you can document the ledger codes in the following way: –

InterCo Path 1   B01, B02, P01, B03, B04, B05, B06, B07, B08, B09, P03

InterCo Path 2   G01, G02, B04, G03, G04, G05, G06, G07, G08, G09, B02, G01

InterCo Path 3   P01, P02, G05, P03, P04, P05, P06, P07, P08, P09, G09, P01

Note: Start and end of the path 2/3 are also configured with G01/P01 to define it is a closed loop path

InterCo automation becomes a primary function of today ERP/Accounting software. Whenever your financial management is becoming more sophisticated as results of an increasing number of branches, projects, joint ventures etc. you have to manage a mass volume of inter-company transactions. Below is a typical cross-ledger journal entry of the above company group after implementation of the InterCo automation: –

Dr Company P02   Inventory                         XXXXXXXX

Dr Company P06   Inventory                         XXXXXXXX

Dr Company P08   Inventory                         XXXXXXXX

Cr Company G03   Sales Revenue                                              XXXXXXXX

Cr Company G07   Sales Revenue                                              XXXXXXXX

Cr Company B05   Project Income                                             XXXXXXXX 

The InterCo automation process is to determine current account code with one or more contractual companies along each InterCo paths to output a completed set of InterCo journal entries and related elimination journal entries.

By documented the above InterCo path setting, the IntrerCo automation can support three different models of InterCo connection by additional settings: –

  • Star Structure – current accounts for most of the companies are linked to a central company
  • Internet Structure – current accounts for most of the companies are linked together
  • Railway Structure – similar to the path of railway stations where few stations are functioned as an interchange station

Elimination Ledger   X01(All)

Note: Inter-Co transactions of all ledgers will be reversed to elimination ledger X01

Route Distance   Shortest

Note: When there are more than one routes determined, the system will use the shortest route

Data Source Column Setting

The Calc function %InterCo allows you to configure specific data source columns which contain cross-ledger journals and to activate InterCo automation: –

Ledger                       Voucher                          Account     

All%InterCo(Path)     All%InterCo(Journal)    All%InterCo(Prefix:11020,Suffix:)

where “Path” is a Table ID or Worksheet which contains the InterCo Path settings

            “Journal” is to define Source Column which contains InterCo journal numbers

            “Prefix” is to define Current Account code prefix, “Suffix” is optional

            “All” represents to select all data of the source column

Note: By default, all current account codes follow a code assignment standard: User-defined prefix + Linked Ledger Code + optional suffix, users can override for particular current account codes by using a mapping table