Intercompany

Intercompany transactions are sales, purchases, payments, or transfers that happen between two legal entities within the same corporate group. Each entity records its side independently — a sale in one company is a purchase in the other — and the matched balances are eliminated on group consolidation so they don't double-count revenue or inventory. Business Central supports intercompany posting between linked companies in the same database. Dynamics 365 Finance scales it across hundreds of legal entities with shared chart-of-accounts policies, intercompany payments, and intercompany inventory transfers. Both products produce the intercompany ledger entries needed for group consolidations.

In practice, the reason intercompany transactions are recorded twice — once in each entity's own books — rather than as a single shared record is that each legal entity has its own statutory reporting obligations and its own set of books that must stand alone for audit and tax purposes. The consolidation elimination step exists precisely to remove the double-counting that would otherwise happen when combining entities that already recorded the same underlying transaction from two sides.

Where confusion shows up: intercompany balances that don't net to zero at consolidation (Entity A shows a $10,000 receivable from Entity B, but Entity B's payable to Entity A shows $9,800) are a common close-process headache, usually caused by a timing difference (one side posted before period-end, the other after) or an FX rate applied inconsistently between the two entities' postings. Reconciling intercompany balances before consolidation, not during it, is the practice that keeps a multi-entity close from slipping.