About rules for balancing inter-branch transactions

An inter-branch transaction occurs when one branch of an organisation is involved in a transaction with another branch of the same organisation.
Branches engaging in transactions with one another debit and credit each other as they would if there were no corporate relationship between them.

Transactions between branches of an entity can take multiple windows and can occur between any branches of the entity.
The transactions are processed differently depending on whether both branches are legal entities (or are units of different legal entities). There are two basic types of inter-branch transactions:

1. If transactions occur between branches that are legal entities themselves or are subordinate branches of different legal entities, they should be balanced in each branch involved so that the accounts of each legal entity will be in balance.
2. If transactions occur between a consolidation branch and its subordinate branch, these transactions do not always require balancing within each branch.
   However, it may happen that some inter-branch transactions require elimination before reporting.

In Visma Net, an inter-branch transaction is considered a transaction of the first type if the following criteria are met:

• The branches involved in the transaction post their records to different ledgers.
• The branches use the same ledger, and for the ledger, the Branch accounting check box is selected in the Ledgers (GL201500) window.

Inter-branch transactions of the first type should be balanced in such a way that each branch can file reports separately.

In Visma Net, the rules for balancing inter-branch transactions define offset accounts to be used for particular branches involved, depending on the accounts used in the original transactions.

Let's create balancing rules based on the following example: Consider a retailing organisation with several autonomous branches (Model 2).
To use volume discounts, Branch 1 purchases goods for itself and other branches and then transfers the purchased inventory to other branches.

For example, Branch 1 moves some of the purchased inventory from its asset account 12000 to Branch 2's asset account 12100 and records the following journal entries.

Branch	Account	Debit	Credit
Branch 1	12000	0.0	€ 3867.49
Branch 2	12100	€ 3867.49	0.0

To balance these transactions for each branch, we should add one complementary transaction for each original transaction, as shown below.

Branch	Account	Debit	Credit
Branch 1	12000	0.0	€ 3867.49
Branch 1	XXXX (Receivables from Branch 2)	€ 3867.49	0.0
Branch 2	12100	€ 3867.49	0.0
Branch 2	YYYY (Payables to Branch 1)	0.0	€ 3867.49

In this example, XXXX and YYYY are offset accounts that should be defined by the balancing rules. XXXX is an account used by Branch 1 to record the amounts receivable from Branch 2, and YYYY is an account used by Branch 2 to record the amounts payable to Branch 1.

Using specially created offset (inter-branch) accounts helps you efficiently identify inter-branch transactions, view that they are in balance, and eliminate them when you close an accounting period.
Failure to eliminate inter-branch transactions when preparing the consolidated financial statements results in overstated financial results and can lead to legal consequences.

In Visma Net, you can create account mapping by using the Inter-branch account mapping (GL101010)window.
For each branch, specify a range of accounts that might be involved in inter-branch transactions.
In each branch, specify offset (inter-branch) accounts for amounts to be paid to other branches (Payables to Branch 1, Payables to Branch 3, and so forth) and for amounts to be received from other branches (Receivables from Branch 1, Receivables from Branch 2, and so forth).

The following terminology is used in the Inter-branch account mapping (GL101010)window:
An originating branch is always the branch specified in the top part (header) of the document to be balanced, and each of the branches specified in the document lines are the destination branches.

For each branch selected in the top part of the Inter-branch account mapping (GL101010)window, use the Transaction in the originating branch tab to specify the offset accounts to be used for specific ranges of accounts in each of the other branches. Then, if an inter-branch transaction refers to an account in one of the specified ranges in any destination branch, the system will generate a new balancing transaction in the originating branch for the respective offset account.

You can use the Transaction in the destination branch tab to specify the offset accounts to be used for generating balancing transactions in other branches if the inter-branch transactions refers to accounts within specific account ranges in the destination branches.

To better understand how to use the Inter-branch account mapping (GL101010)window, consider the following example: There are three branches in an organisation.
If you select Branch 1 in the top part of the window, on the Transaction in the originating branch tab, for Branch 1 you can specify the following offset accounts: Receivables from branch 2, Receivables from branch 3.

For the above example, by using the Transaction in the destination branch tab, you can specify the following offset accounts:

• For branch 2: Payables to Branch 1
• For branch 3: Payables to Branch 1

Successively selecting Branch 2 and Branch 3 in the top part of the window, you can specify the inter-branch accounts for all possible inter-branch transactions.

The system will apply the balancing rules to the inter-branch transactions once the following conditions are met:

• The transaction accounts match the account range specified by rules for inter-branch transactions.
• The transaction's header and the details refer to different branches.

Complementary transactions are generated when the original transactions are posted.