Example
An organization owns three companies: A, B, and C. Company A receives a $150 invoice for supplies which all three companies use. Company A enters the invoice in Payables and splits the expense three ways, creating three distributions, one for each company.
At this point, the journal entries for this transaction are out of balance, because company A has a liability of $150, and an expense of $50. Companies B and C are also out of balance, with expenses of $50 and no liability. The T-accounts below illustrate this situation:
During the posting process, General Ledger identifies unbalanced entries such as the one shown above and automatically creates additional intercompany balancing entries. Then it posts both the invoice and balancing entries.
The T-accounts below illustrate the intercompany balancing entries which General Ledger creates to resolve the imbalance presented in the preceding example:
