The Intercompany Time and Expense feature enables the transfer of time, expense, or both charges from one subsidiary to another. If this feature is enabled in your account, an intercompany clearing account is automatically created when the first intercompany transaction occurs. The intercompany clearing account is used to offset the transfer of expenses from the originating subsidiary (employee’s subsidiary) to the related subsidiary (customer’s subsidiary). This system-generated account enables the balancing of debits and credits in each subsidiary.
When you enable this feature, the intercompany clearing account prevents you from modifying the subsidiaries associated with all account types except Bank.
This is an account of the Other Current Asset type. By default, it does not have an account number. You can change the name. You cannot make other changes, merge, delete, or inactivate the intercompany clearing account. You cannot create other accounts of this type.
The intercompany account associated with a subsidiary is used for transactions where that subsidiary is the originating subsidiary. This ensures that adjusting journal entries are all in the base currency of the originating subsidiary. For example, the following intercompany adjustment journal entries illustrate the transfer of expenses entered by a Canadian employee working for a U.K. customer, to be charged to the U.K. subsidiary:
| Subsidiary | Account | Debit | Credit |
|---|---|---|---|
| Canadian Subsidiary | Intercompany Clearing CA Dollars | 3,395.24 | |
| Canadian Subsidiary | Expense Account | 3,395.24 | |
| U.K. Subsidiary | Expense Account | 3,395.24 | |
| U.K. Subsidiary | Intercompany Clearing CA Dollars | 3,395.24 |
Automated intercompany adjustments use Intercompany Clearing accounts.