Intercompany Elimination in Rapidstart Forecast allows user to specify the rules for generating the automatic elimination journal. This auto generation process will take place whenever you import Trial Balance, and when you run the Calculate Profit & Loss, Balance Sheet and Cash Flow task.
Requirement
There are 2 requirements for setting up the auto rules in the Intercompany Elimination:
1. Both entities must be belonging to a group, it can be the same group or a different group. The elimination data will be stored to the closest Elimination group for both entities.
Example Entity hierarchy belows:
ABC Group
--- Group AB
--- Subgroup A
--- Company A1
--- Company A2
--- Subgroup B
--- Company B1
--- Company B2
--- Group C
--- Company C1
--- Company C2
Scenario:
- Intercompany elimination between Company A1 & A2, the elimination data will be stored in Subgroup A Elimination node
- Intercompany elimination between Company A1 & B1, the elimination data will be stored in Group AB Elimination node
- Intercompany elimination between Company A1 & C1, the elimination data will be stored in ABC Group Elimination node
2. Both accounts has to be a specific elimination account
We can only calculate the amount to be eliminated if the account is a specific elimination account. If the journal is using a non-elimination account, then you will need to do the manual Intercompany Elimination journal.
Rules Order
Once you have come up with the list of rules to be added to the Intercompany Elimination Auto Journal, you need to consider the order of these rules. As the order may determine the amount to be eliminated in the journal. As rule of thumb, you can add the rules which you know will eliminate all the data in the Source Entity & Account. Then at the end, you can insert the rules to eliminate the remaining amount in the account.
For example the scenario below:
You have rules like this:
1. Entity A, Account 1000 to be eliminated with Entity B, Account 2000
2. Entity C, Account 1000 to be eliminated with Entity B, Account 2000
3. Entity D, Account 1000 to be eliminated with Entity B, Account 2000
4. Entity D, Account 1000 to be eliminated with Entity E, Account 2000
As you can see from above rules, Entity A,C, & D are eliminated against Entity B. However part of Entity D also eliminated with Entity E. This is where the order of the rules is important, as wrong order can cause the data is not eliminated properly.
First, we'll see which source can be eliminated first. From the above rules, we can add the 1st and 2nd rules to the order.
1. From Entity A, From Account 1000 ---> To Entity B, To Account 2000
2. From Entity C, From Account 1000 ---> To Entity B, To Account 2000
Until this step, it's pretty straightforward. The next step is that you want to eliminate Entity D, Account 1000 to Entity B, Account 2000. We can't simply eliminate the amount in Entity D, as it's also eliminated against Entity E. So we need to use the remaining amount in Entity B, Account 2000 to know the eliminated amount.
3. From Entity B, From Account 2000 ---> To Entity D, To Account 1000
Then lastly, we can use the remaining amount for entity D, Account 1000 to be eliminated with Entity E, Account 2000
4. From Entity D, From Account 1000 ---> To Entity E, Account 2000
Say, we have the data for a period, as below:
Entity A - Account 1000 = 2000
Entity B - Account 2000 = 8000
Entity C - Account 1000 = 3000
Entity D - Account 1000 = 5000
Entity E - Account 2000 = 2000
Following the above order we can get the intercompany journal as follows:
1. Entity A - Account 1000 = 2000 ---> Entity B - Account 2000 = 2000 (Entity B, Account 2000 remaining = 6000)
2. Entity C - Account 1000 = 3000 ---> Entity B - Account 2000 = 3000 (Entity B, Account 2000 remaining = 3000)
3. Entity B - Account 2000 = 3000 (remaining amount) ---> Entity D - Account 1000 = 3000 (Entity D, account 1000 remaining = 2000)
4. Entity D - Account 1000 = 2000 (remaining amount) ---> Entity E - Account 2000 = 2000