In this article
Intercompany Trade: Example
Review the following example to better understand how the intercompany trade functionality works.
Entity Setup
An organization consists of the following offices (or entities): West, East, Manufacturing, and Warehouse. Intercompany trade is set up among all the entities as follows. For example:
- When the Manufacturing entity ships goods to the Warehouse, a sales invoice is created in the Manufacturing entity, and a purchase invoice is created in the Warehouse entity.
- When the West or East entity sells goods from the Manufacturing entity, the sales and purchase invoices are created instead of Due to and Due from journal entries.
Customers and vendors are set up as follows:
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Entity: West
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Entity: East
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Entity: Warehouse
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Entity: Manufacturing
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Transactions Purchase
The Warehouse requests goods from the Manufacturing entity. A purchase order is entered with the following settings:
- Header Entity: Warehouse
- Vendor: Mnfs Vendor
When the purchase order is released, the following sales order is automatically created:
- Header Entity: Mnfs
- Customer: W/H Customer
Transactions Sale
The Warehouse sells goods to the West entity. A sales order is entered with the following settings:
- Header Entity: Warehouse
- Customer: West Customer
When the sales order is posted, the following purchase order is automatically created:
- Header Entity: West
- Vendor: W/H Vendor
Location
The locations for the sales documents are different from the locations in the purchase documents.
- In the sales document, the location is from where the goods are shipped.
- In the purchase order, the location is to where the goods are to be delivered.
The locations used in transaction documents are the default location for the entity, or can be manually specified at the time the document is created. Continuing with the example:
The Warehouse sells goods to the West entity. The Warehouse entity has the MAIN location as the default location. The West entity has the WEST location as the default location. These are the locations from where and to where the goods are shipped. These locations are not necessarily owned by the entities. If another entity owns the location, Due to and Due from journal entries are added to the transaction.
A sales order is entered as follows:
- Header Entity: Warehouse
- Customer: West Customer
- Location: WH (manually entered)
When the sales order is posted, the following purchase order is automatically created:
- Header Entity: West
- Vendor: W/H Vendor
- Location: WEST (default location from the entity setup)
If the location WEST is owned by the entity 000, there will be the due to/due from journal entries between 000 and West once the purchase order is posted.
