Eliminations
When you consolidate financial reports, intercompany transactions and journals appear in both companies. This can inflate the group’s overall revenue, expenses, and balances, making the reports inaccurate. Eliminations remove these intercompany entries from consolidated reports so they reflect only your group’s transactions with external contacts.
Scenario: Zylker Corp sells goods worth ₹50,000 to Zylker Inc. and raises an intercompany invoice. In the individual books:
- Zylker Corp records ₹50,000 as debit to Intercompany Accounts Receivable.
- Zylker Inc. records ₹50,000 as a credit to Intercompany Accounts Payable.
In the consolidated report, this ₹50,000 appears on both sides, inflating the total revenue and expenses. To correct this, you record an elimination entry to offset both entries:
- Credit Intercompany Accounts Receivable by ₹50,000
- Debit Intercompany Accounts Payable by ₹50,000
Now these transactions are eliminated from the consolidated report.
Elimination Subsidiaries
Apart from the subsidiaries you add in the multi-company console, Zoho ERP automatically creates an elimination subsidiary for each parent subsidiary in the hierarchy. An elimination subsidiary is a dedicated space to record elimination entries that offset intercompany balances before consolidation.
Note: The Elimination Subsidiary is a virtual entity. It does not have its own transactions, intercompany data, or chart of accounts. It is used only to record elimination entries.
An elimination subsidiary records eliminations between:
- A parent and its subsidiaries
- Two subsidiaries under the same parent
Create Eliminations
You can create eliminations between two subsidiaries for a selected period.
Note: You cannot create an elimination if:
- There are no intercompany transactions between the selected subsidiaries for the selected period.
- All intercompany transactions between the selected subsidiaries for the selected period have already been eliminated.
You can create adjustments manually if additional corrections are required.
To create an elimination:
- Go to the Multi-Company Console.
- Select Eliminations in the left sidebar.
- Click + New in the top right.
- In the pop-up, select the two subsidiaries between which you want to create the elimination.
- Select the period for which you want to eliminate intercompany transactions.
- Click Proceed.
All fetched intercompany transactions and journal entries between the two subsidiaries for the selected period are displayed. Each entry includes the corresponding transactions from both subsidiaries.
If one side of a transaction is marked as Incomplete, you cannot create eliminations for that transaction.
Scenario: Zylker Corp sells goods to Zylker Inc. and raises an intercompany invoice. In the elimination view, this appears as a single entry with two rows, the invoice recorded by Zylker Corp and the corresponding bill recorded by Zylker Inc. Similarly, a payment made by Zylker Corp and the corresponding payment received by Zylker Inc. appear together as one entry. This lets you confirm both sides are present before creating an elimination.
To view the journal details of an entry, click on it. A side pane opens displaying the journal details of both corresponding transactions.
Select the transactions you want to eliminate, or click Eliminate All to eliminate all displayed transactions.
Click Eliminate.
In the New Elimination Journal page, the Elimination Subsidiary in which the journal will be recorded will be automatically selected.
Review the remaining details.
Add notes if needed.
Click Save.
The elimination journal is created and recorded in the selected Elimination Subsidiary.
View Elimination Journals
You can review an elimination journal after it has been created. To view an elimination journal:
- Go to the Multi-Company Console.
- Select Eliminations in the left sidebar.
- Open the elimination journal you want to view.
To view the intercompany transactions eliminated by a journal, click View Transactions at the top. The corresponding entries with both sides of each transaction are displayed.
Delete Elimination Journals
When an elimination journal is deleted, the intercompany transactions included in the elimination are automatically dissociated and can be included in a new elimination. To delete an elimination journal:
- Go to the Multi-Company Console.
- Select Eliminations in the left sidebar.
- Open the elimination journal you want to delete.
- Click Delete.