Setup for Internal Transfer Journals Related to Costs

The accounting of internal transfer journals for costs requires the following accounts:

• Stakeholder accounts

  Cost amounts from internal transfer journals are entered as a debit to these accounts. These accounts are cost accounts for the stakeholder that mirror the accounts in the joint venture.

• Cutback accounts

  Cost amounts from internal transfer journals are entered as a credit to cutback accounts for the joint venture. Capturing these amounts in cutback accounts enables a managing partner of a joint venture to report on its net costs for the joint venture.

  Note: In the instructions in this guide for the setup for Receivables invoices, cutback accounts are referred to as partner accounts. Although referred to as cutback accounts here, they're both used for the same purpose.

• Accounts for overhead charges

  For internal transfer journals with overhead charges, instead of a cutback account, you need to account for overhead amounts in a separate cost recovery or revenue account, depending upon your business needs.

• Partner contribution accounts for the joint venture and stakeholder

  If you plan to use partner contributions to cover a stakeholder’s share of costs, then internal transfer journals will include additional lines to record partner contribution amounts in these accounts. These accounts are the same accounts assigned to partner contributions when they’re created.