ANS-0965 · ONEWORLD & MULTI-SUBSIDIARY
What GL Account Type Should Intercompany AR and AP Use in NetSuite?
Properly classifying intercompany accounts receivable and payable is crucial for accurate financial reporting and efficient reconciliation in NetSuite.
Short answer
The appropriate GL account type for intercompany AR and AP in NetSuite depends on their primary function. For elimination purposes, use A/R and A/P account types. If they serve as clearing accounts, classify them as current assets. This ensures correct accounting for foreign currency gains/losses and leverages NetSuite's subledger for reconciliation.
Scenario
Organizations utilizing NetSuite often need to manage intercompany transactions, which involve accounts receivable (AR) and accounts payable (AP) between subsidiaries. A common question arises regarding the correct general ledger (GL) account type to assign to these intercompany AR and AP accounts. The classification impacts financial consolidation, elimination processes, and reconciliation efforts.
Solution
The appropriate GL account type for intercompany accounts receivable (AR) and accounts payable (AP) in NetSuite depends on the intended purpose of these accounts.
If the primary purpose of the intercompany AR and AP accounts is for elimination, they should be assigned the A/R account type and A/P account type, respectively.
If the intercompany AR and AP accounts are intended to function as clearing accounts, they should be classified as Current Assets.Utilizing A/R and A/P account types also offers additional benefits:It provides a mechanism to settle intracompany invoices and bills.It facilitates the correct accounting for realized gains and losses when foreign currency transactions are involved.It can reduce the overall number of accounts required, as NetSuite provides a natural subledger for reconciliation of these account types.
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