Elimination Journal Entries

Many business transactions between a parent company and its subsidiary involve a profit or a loss. Among these transactions are intercompany sales of merchandise and intercompany sales of fixed assets. Consolidated financial statements compute the financial position and the results of operations of two or more subsidiaries (affiliated companies), as if they were one company. The unrealized profits or losses in these intercompany transactions must be eliminated until intercompany profits or losses are realized through the sale of the assets to outsiders.

Failure to eliminate unrealized profits and losses result in consolidated income statements reporting not only the results of transactions to outsiders, but also the results of related party transactions within the affiliated group. Similarly, non-recognition of realized profits and losses would misstate consolidated net income in the consolidated financial statements.

Elimination journal entries are regular journal entries, except that they are associated with elimination subsidiaries. You must associate each elimination journal with a single elimination subsidiary. You create elimination journal entries at Transactions > Financial > Make Journal Entries. On the Journal record, select an elimination subsidiary. For details about how to set up elimination subsidiaries, see Elimination Subsidiaries.

Note:

If you are reviewing reports when the elimination process is running, the reports may change as the process runs. If the elimination process fails, some of the elimination journal entries are not created. It is recommended that you re-run the elimination process. Running the elimination process again deletes all of the elimination journal entries created on the previous run to ensure no duplication.

Related Topics

Journal Entries in OneWorld
System-Generated Journals for Payments
Making Advanced Intercompany Journal Entries
Making Intercompany Journal Entries
Enabling Intercompany Time and Expenses

General Notices