Inter Company Postings 2
So we are starting intercompany postings. This can be called as intercompany postings or cross company code postings. So, we have a company called DRL, that is doctor Reddy Labs Group. In that, we have one company code is doctor Reddy Labs Bulk drugs, another one is doctor Reddy Labs Pharma. In case if there are intercompany postings, how to post accounting entries. And in the books of paying company, receiving company, how accounting entries are going to be posted. So for that purpose, we have created… already the regular company code is doctor Reddy Labs Bulk drugs, so we have created doctor Reddy Labs Pharma products also. These 2 companies are there now. Let us post accounting entries in one company, and how it is going to post in other company that we’ll see.
So as a first step, what we need to do is we need to create GL accounts. So we have to create a GL account with intercompany account for DRLP. So there is books of DRLB, this is one company code. Then there is books of DRLP. In the books of DRLB, we are going to create intercompany account for DRLP company code. In the books of DRLP, we have to create intercompany account for DRLB company code. So cross company code. So we are going to maintain these company code accounts for the opposite companies. So for that purpose, I need to create now. These are the GL accounts. 200701, 200702. In the account group 200701 other current assets.
So in this I’m creating, nothing wrong with either current asset or liability. Wherever you create, it is going to work out, no problem at all.
Now first company code. Let’s go to FS00. 200701. In the books of DRLB, while creating intercompany accounts, we have to be careful to choose the correct company. Now 200701, we are creating in the books of DRLB. Click on create. Account group, other current assets. This is balance sheet account. So what I’m going to do is this is intercompany accounts for DRLP.
Control data. Check ‘only balances in local currency’ and ‘line item display’ sort key 001. Field status group, G001. Save it.
Now in the books of DRLP, I’m creating 200702. Click on create. This is other current assets. Balance sheets account. This is DRLB account Intercompany account.
Check ‘Only balances and local currency’ and ‘Line item display’, sort key is 001, field status group is G001. Save it. So we have created 2 accounts, company code wise we have created.
Next, small configuration we have to make. Financial accounting (New), General ledger Accounting.
Prepare cross company code transactions. Here we need to prepare cross company code transactions. So T-code OBYA. First go here. It’ll ask what are the company codes. First company code is DRLB and second is DRLP. Here you may get a doubt that in case if I have 3 company codes what I have to do? So what we need to do? If you have ABC. AB, BC, and AC, like that we have to create. We have to establish the relationship like that. Now since we have 2 company codes, DRLB, DRLP. So first company code, DRLB. 2nd company code is DRLP. It doesn’t make any difference whether first or second. For our understanding, we are putting that’s all. Then there is just a frame. In this frame, we need to fit the accounts. We can see company code1, company code2. Now company code 1, we said DRLB. Posted in DRLB, cleared against DRLP.
So debit posting key as usual, 40. And credit posting key 50. Account debit, debit or credit, it is going to be 200701. What is 200701? 200701 is nothing but DRLP intercompany account. So receivable or payable 200701.
Similarly, company code 2. Same 40, 50. Accounts receivable, payable here 200702. This is nothing but DRLP. In case if you are posting debit or credit, that should post to 200702 which is nothing but DRLB account. In the books of DRLB, DRLP account I have given. In the books of DRLP, DRLB account is given. So like that we have to create. And the transaction code BUV, that is clearing between company codes. Save it. Great. That’s all.
Now let us post accounting entry in F-02. First I need to make a small change in the GL account. Go to FS00. In both the account 200701, 200702, what we need to do is make a small change here in the control data, select open item management. We have used this open item management in different accounts also earlier, in bills of exchange. Because we are allowing the system to manage the open items on its own. Similarly in create/bank/interest, select post automatically only. Because here we are not going to post to this account, system is going to post automatically. The warnings appeared.
Anyhow we can change. Similarly in 200701 also in DRLP, make same settings. Select post automatically and open item management. Save it.
Now I’m posting accounting entry. Say for example here, Rent paid by Doctor Reddy Labs Bulk drugs on behalf of DRLP. So this company, that is Doctor Reddy Labs Bulk drugs is paying their office rent of this company. In such case, how to post accounting entry. So here go to F-02. So while posting office rent, what we need to do is first always choose credit line item not the debit. Generally, what we do, office rent account return to bank. Now what we are going to do now. First of all, remember that first I am posting in the books of DRLB. Now first to take line item 50. Why I have to take 50, that you’ll understand once I complete the transaction. 50 and bank account, 200405 is my bank account.
Bank account is credited and say for example, office rent say 36,500. Here, what I’ll do is office rent of DRLP paid by DRLB.
So first line item in the books of DRLB, bank account is credited. Now second line item, posting key 40. Account office rent, what do you do? You select this and here take the company code. DRLP. Press enter.
Choose like this. 400301. Now take the company code here. This is in the books of DRLP.
So new company code is this one. First line item is in this DRLB. Second line item, DRLP. So office rent of DRLP is debited, bank account is credited in the books of DRLB. Press enter.
DRLP. 36500. That’s all. Click overview. So here, DR Reddy Lab Bulk Drugs. 36500, 36500.
This first line item is DR Reddy Lab Bulk Drugs, second line item is Dr Reddy Labs Pharma. Now this is not over. Click on simulate. Actually, what is the complete entry? Then you’ll come to know.
This is a complete entry. See here, first of all, we’ll see doctor Reddy Lab Bulk Drug. 50, first line item is credited bank account because in doctor Reddy Lab Bulk Drugs is from this company code. From the bank account it is going out. Debit what? DRLP intercompany account. So the DRLP intercompany account is going to be debited because we are paying on behalf of this company, that’s why I’m debiting other company account in my books. Now let us see the DRLP account. So DRLP books of accounts are DRLP office rent. For DRLP, office rent is paid. So that’s why debit expenses. DRLB is paying, so DRLB intercompany account. In the books of DRLB. Here company code means in which company code it is paid. But the account is DRLB account. So office cent is debited, DRLP account is credited. This is what I want. You need to carefully understand this accounting entry. Save it. Then it will give you one account number. There are 3 documents created here. One is in the paying company code account.
Oh, sorry. Yeah. See DRLB is paying company code. DRLP is other company code. At the top is cross company code. Three document numbers here. Now what is this cross company code document number? Cross company code document number is the first two digits are from the first document number in which this cross company code account is going to be posted in the books of originating company code, whoever is making payment. So these four line items will be posted in the cross company code here. The number generated is 32, is DRLB document number, and the second four digits are nothing but the company code name. Last two digits is the year. That is the cross company code. In the books of DRLB 32, In the books of DRLB, second entry this is. And this also will be posted in DRLB itself because this is the originating company code. If you want to display, you want to see it once again.
See in the books of 32, DRLB. And here the cross company code document number is there. Notice here the document number? Double click on this. It’ll take you to the cross company code document number. Otherwise, I’ll show you. Go to Document, Cross Company Code Transactions. We have Change, Display, Reverse. So we can even reverse it. Click on Display. See. This is the number I want to see.
Press enter.
This is the intercompany account. This is 32, 40. This is the cross company code transaction. This is the number in this. This is separately posted and a common entry is posted in the originating company code. These 2 are generated by system. This is one way. Like this, any expenditure you can make on behalf of another company by this company. Now let us look into the vendors and customers. Say for example, if I am making payment on behalf of DRLP, in such a case, how to do that. Say for example, Doctor Reddy Labs Bulk Drugs and Pharma. Bulk Drugs is making vendor payment on behalf of Dr Reddy Labs Pharma. In such a case, what to do? For that, I need to make a small configuration setting also. Even from F-02 also, I can post an accounting entry, but that will not clear the open item. In order to clear the open item, a small configuration has to be done. But before that, if the vendor account of Doctor Reddy Labs Pharma has to be paid by Doctor Reddy Labs Bulk drugs, what do I need to do? Firstly, you have to have what you call a vendor account. Vendor account means we have just copied the company code, but, we have not yet created any, what you call vendor accounts. Now I can create a vendor account. Go to Accounts Payable. So we have seen all the accounts payable and accounts receivable both. So you can try not only accounts payable, accounts receivable also we can do. So here, on behalf of DRLP, DRLB makes vendor payment. This is what I want to do now. Similarly, you can receive from a customer of this company code, you can receive and vice versa. Both can be done. Let us now create a vendor account.
Accounts Payable, Master records, Create FK01. Company code, DRLP. So first I need to create a master record. Account group, I’ll take Raw material account group. Whatever we have created for Dr Reddy Labs I can take it because this is a group level. So anybody can use this. That’s why I told you that when we copy company code, client level objects we can use it. I can create a test vendor for intercompany postings based on the vendor name.
Here, Recon account: Material vendors 101201.
Payment terms: 0001, Tolerance Group is DR09. Tax not required. Save it. So vendor 400511 was created in company code DRLP. So let me post an accounting entry. Before that, I need to make a small configuration. If you have to clear vendor open items because when doctor Reddy Lab Bulk Drugs is making payment on behalf of the other company, so when I’m going to make the payment, I need to clear the open item in the other company code. In order to clear the line item of the other company, I need to make a small configuration here. Go to Accounts Receivable and Accounts Payable, Business Transactions, Outgoing Payments, Manual Outgoing Payments, Prepare Cross-company Code Postings. The T-code is OB60. New Entries. Here company code is DRLB, Payment made for DRLB. Now what is a clearing transaction. Clearing transactions means incoming payment, outgoing payment.
So this is outgoing payment. From DRLB to DRLP. So vendor payment means outgoing payment. Similarly, DRLB to DRLP. Incoming payment.
So for incoming payment, say, in case, if you are going to collect incoming payments from DRLP, that is customer of DRLP, you are received by the DRLB. In such case, this will clear the open items. You know what is meant by clearing off the open items. So in order to clear the open item of the other company code, I need to assign this clearing transaction, on program they have given. This is the clearing transaction they said and you have to give this. Save it. In case if you want to do vice versa, if DRLP you have to do it, DRLP, DRLB. And if you want to clear the open items of DRLP to DRLB then you have to select outgoing payment, incoming payment. You can try both from this to that, that to this. So this configuration I need to do. Now let us post an invoice. We have created a vendor, and let me post an invoice in the books of DRLP. Document entry, F-43, I’m posting. Say here procure raw material. In the books of DRLP I’m posting remember. While executing the business process, you have to be very clear what you are doing. Point number 1, you need to understand the business process. Number 2, need to understand the configuration settings. Number 3, you need to post the accounting entries as per the business process you understand. So now what are we doing? We are posting an invoice in the books of DRLP. We have only one company code test vendor for inter company postings.
So vendor account is credited, then raw material account should be debited. So raw material account will return to vendor account. So that’s why debit this GL. So our raw material account is 200201, Inventory of raw material.
Save it. Vendor entry is posted.
Now I need to make the outgoing payment. Outgoing payment means I can do F-53, F-58 also I can use. F-58 is nothing but Post + Print forms. You can use if you have configured automatic payment programs. Now clearing up open item, I’m doing F-53. In such case, what you need to do? Now Dr Reddy Lab Bulk Drugs means DRLB is the payer. He is making payment. So my bank account is credited. Created in the sense, I’m paying out of this bank account. Amount 1 lakh 22,000. Vendor payment of DRLP. Now, while choosing the vendor, select DRLP. Choose this vendor ‘Test vendor for inter company 400511.
After choosing, process open items. Now we are going to see the open line item of DRLP. Now 122, 122. It will be cleared.
So here also we receive cross company code postings.
So 15 vendor payments, it starts with 15. So 15 lakhs 1 of this company code. 0001500010 of DRLB because it’s the originating company. DRLP is the receiving company. This is the accounting entry. If you want to see, Document, Cross Company Code Transaction, Display. You can see even list also by clicking on Document List.
Now what is the accounting entry? See, Axis Bank head office of DRLB. So because it is credited 50 and the DRLP account is debited. Because intercompany account of DRLP is debited. Because we are paying on behalf of the DRLP, we are debiting it. So bank is going out. We have credited this. In the books of DRL Pharma, so here this test vendor account is debited because vendor account is paid, we have paid them, that’s why that is debited and intercompany account of DRLB is credited. In our books, that is the paying company code books, their account is debited and since bank is going out, it is credited. In the books of DRLP, there’s a receiving company. Vendor account is paid, that’s why vendor account is debited. 25 is debit. And the paying company code because credit the payer, debit the receiver. So he’s the payer, that’s why we have credited their account.
So like this, now what I want you to do is you create customer. Post customer invoice in the books of any company, whatever it may be. Now let other companies receive the money on behalf of the other company. So I have shown you how to post the accounting entry, and clear the open item of the other company code. Similarly, you also do vendor payment as well as customer payment received from customer, that also you try. But for that, this configuration needs to be done.
Without that, it will not clear the open item.