If you use one entity's cash account to receive income meant for a different entity, you must set up due to/due from accounts to ensure that your accounting records are correct. iMIS generates due to/due from entries for configured entity relationships when the general ledger export is run. These entries correct balancing problems created by entities receiving cash for which they do not have matching income, and entities receiving income for which they do not have matching cash. The following terms are related to due to/due from balancing:
- Due to owner entity - This liability entry is created for the entity that owns the cash account that received the money but is not entitled to the income. This liability entry offsets the cash the entity received but did not own.
- Due from cash entity - This receivable entry is created for the entity that owns the income to make up for the asset it is entitled to but did not receive.
From Settings > Finance > Due to/due from, staff users can configure due to/due from relationships between general ledger accounts, and set up entries for each multiple-entity combination in which cash is received by one entity for transactions that belong to another entity.
Setting up due to/due from accounts
To set up due to/due from accounts, do to the following:
- Go to Settings > Finance > Due to/due from.
- Select Add new due to/due from.
- Select an Owner entity. This is the entity that owns the income or accounts receivable.
- Select a Cash entity. This is the account that will receive the cash.
- From the Owner due from account drop-down, select the GL account in which to record the intercompany receivable (debit) transaction for the entity that owns the income.
- From the Cash due to account drop-down, select the GL account in which to record the intercompany payable (credit) transaction for the entity in which the cash account resides (cash entity).
- Click Save.
Examples of due to/due from scenarios
In the following scenarios, a due to/due from adjusting transaction can be created automatically when an order is invoiced:
- An invoiced order contains multiple product lines with multiple entity owners
- A prepaid order's payment is deposited to a cash account owned by an entity other than the order's overall entity
Since an overall order or invoice must have a single entity owner, the entity owner of the first line item is designated as the order's overall owner. In this scenario, a due to/due from adjusting transaction generates between the main order's owner and the secondary product's owner entity.
In this scenario, a due to/due from adjusting transaction generates between the cash entity owner and the overall order's entity owner.
The following examples outline several due to/due from scenarios for entities A, B, and C. For simplicity, each entity's alphabetic designation indicates the entity's corresponding GL account numbers. The GL accounts used in the examples are as follows:
| Entity A | Entity B | Entity C | |
|---|---|---|---|
| Cash | A-1100 | B-1100 | C-1100 |
| Accounts receivable | A-1200 | B-1200 | C-1200 |
| Inventory | A-1300 | B-1300 | C-1300 |
| Income | A-4000 | B-4000 | C-4000 |
| Cost of goods sold | A-5200 | B-5200 | C-5200 |
The inter-company due to/due from accounts are as follows:
| Entity A | Entity B | Entity C | |
|---|---|---|---|
| Due from entity A | N/A | B-1501 | C-1501 |
| Due from entity B | A-1502 | N/A | C-1502 |
| Due from entity C | A-1503 | B-1503 | N/A |
| Due to entity A | N/A | B-2501 | C- 2501 |
| Due to entity B | A-2502 | N/A | C-2502 |
| Due to entity C | A-2503 | B- 2503 | N/A |
The products and their entities are as follows:
- Product A - Unit price of 50.00, assigned to Entity A
- Product B - Unit price of 100.00, assigned to Entity B
Example 1
Non-prepaid order for Product A and Product B - The invoice sales transaction is as follows:
| Debit | Credit | |
|---|---|---|
|
A-1200 - Accounts Receivable (Entity A) |
150.00 |
|
|
A-4000 - Product A Sales (Entity A) |
50.00 |
|
|
B-4000 - Product B Sales (Entity B) |
100.00 |
Because Entity A (assigned to the first line item, Product A) receives the full debit to Accounts Receivable, Entity A incurs an inter-company liability to Entity B, which receives a credit to Income of 100.00. This sales transaction generates the following due to/due from entry:
| Debit | Credit | |
|---|---|---|
|
B-1501 - Due From Entity A (Entity B) |
100.00 |
|
|
A-2502 - Due To Entity B (Entity A) |
100.00 |
Example 2
Prepaid order for Product A for which the funds are deposited into Entity C's bank account - If the payment is processed and recorded when the order is shipped, the invoice sales transaction is as follows:
| Debit | Credit | |
|---|---|---|
|
C-1100 - Cash (Entity C) |
50.00 |
|
|
A-4000 - Product A Sales (Entity A) |
50.00 |
In this example, Entity A receives a credit to Income of 50.00 for the sale of Product A, while Entity C receives the debit to Cash. The inter-company due to/due from balancing transaction that results is as follows:
| Debit | Credit | |
|---|---|---|
|
A-1503 - Due From Entity C (Entity A) |
50.00 |
|
|
C-2501 - Due To Entity A (Entity C) |
50.00 |
Example 3
(This example combines the scenarios for Examples 1 and 2)
Prepaid order for Product A and Product B for which the funds are deposited into Entity C's bank account - If the payment is processed and recorded when the order is shipped, the invoice sales transaction is as follows:
|
Debit |
Credit |
|
|---|---|---|
|
C-1100 - Cash (Entity C) |
150.00 |
|
|
A-4000 - Product A Sales (Entity A) |
50.00 |
|
|
B-4000 - Product B Sales (Entity B) |
100.00 |
The due to/due from transaction generated from this example is similar to a combination of the two inter-company transactions generated in the earlier examples:
|
Debit |
Credit |
|
|---|---|---|
|
A-1503 - Due From Entity C (Entity A) |
150.00 |
|
|
A-2502 - Due To Entity B (Entity A) |
100.00 |
|
|
C-2501 - Due To Entity A (Entity C) |
150.00 |