I have two invoices in my accounts rec. that I want to counter with each other. Comp.A has charged Comp.B on inv.1234 $33,000.00. Now Comp.B has charged Comp.A with inv. 5678 $30,000.00. The complication is that both these accounts are just different departments (each use different bank accounts) within our Indian Band Organization. The auditors have told us to just conter each against each other to remove them off the A/R listing. Sounded easy until I tried doing it. I thought I could do an adjustment from one to the other but I don't think I'm on the right track. Can anyone explain the process I should be using?

Thank you

If you have two different receivables (positive balances) you cannot counter them. You could consolidate them. Is this what you mean?

Likley some assistance from your Adagio Consultant is in order here.

Yes, they are both still in my Receivables. I'm thinking I might have to enter them both into Payables first. I don't want to post anything until I can figure out which way to do this.

If each "company" did a Manual Check from AP and then a Cash Receipt in A/R for the same amount ( 30,000 ) and then "cleared" the check I think you would end up with the result you wanted.

Yes, I think you're right. I'll check with my supervisor and see if she agrees.

Thanks

Hi Linda,

My assumption here is that you are dealing with one adagio "dataset" or company and that your are speaking of two different departments such as "maintenance", "Health" or "Education". As you are probably aware, the problem with entering "intercompany invoices" in Accounts Receivable as revenue is that you will be overstating your revenues for the company as a whole (and also ultimately your expenses, if you "contra" the revenue in "Department A" with and expense in Department "B".

As your Band primarily would follow fund accounting rules, it is likely that your auditor would want you to use "interfund transfers" between departments rather than revenues and expenses. As I mentioned previously, using revenues and expenses for interco transactions results in overstatements of revenues and expenses that your auditor would likely backout at year end. When I worked as the director of finance for a BC Interior First Nation we used interfund transfers extensively. They generally show up after the expenses (in a separate category) on the income statement.

To enter an interfund transfer, you would basically just enter a General Ledger batch entry as follows:

Debit - Expense Account of Dept B $33,000.00
Credit - Revenue Account of Dept A $33,000.00

Debit - Expense Account of Dept A $30,000.00
Credit - Revenue Account of Dept B $30,000.00

I would suggest you use an adjustment batch in AR to clear out both invoces entered previously.

I hope this helps. (Let me know if you require futher clarification)

This makes a lot of sense! Thank you for your help!

Diane