Month-end close Updated November 2026

Intercompany reconciliation

Each entity's intercompany receivable must equal the other entity's intercompany payable. Compare the two balances at month-end, list the differences (invoices booked on one side only, payments in transit, currency translation) and agree who books what before consolidation, where the matched balances are eliminated.

Syntax

Due from B (in A's books) = Due to A (in B's books); Difference = Items booked by one entity only + Payments in transit + FX

Part	What it is
`Intercompany receivable`	Asset in the lending or selling entity
`Intercompany payable`	Liability in the borrowing or buying entity
`Elimination`	At consolidation both sides are removed; a mismatch leaves a plug
`FX difference`	Balances in different currencies translated at different rates

Examples

Entity A: due from B 12,500
Entity B: due to A 11,000
A invoiced B 1,500 on the 31st; B has not entered it

Result: 11,000 + 1,500 = 12,500. B records the invoice (Dr Expense or Inventory 1,500 / Cr Due to A 1,500); both now show 12,500.

A: due from B 8,000; B: due to A 9,000; B paid 1,000 on the 30th, A received it on the 2nd

Result: Payment in transit of 1,000. A records the receipt in the next period; at month-end the difference is documented as timing.

Common mistakes

Each side booking its own view with no agreement: set one entity as the lead whose invoices drive both sides.
Leaving the mismatch to the consolidation team: the elimination entry will not balance and a plug hides the error.
Netting receivables and payables between the same pair without agreement: present gross unless a right of offset exists.

Practice Intercompany reconciliation

These drills check your answer on live data, free, no account needed.

The full workoutClassify every line, enter both adjusted balances, then choose the journal entry the company must record for each item that affects its books.

Questions

Why does intercompany have to match exactly?

Because consolidation eliminates both sides. If 12,500 is eliminated against 11,000, 1,500 is left over and distorts the group's figures.

What causes intercompany differences?

Timing (invoices and payments crossing month-end), one side missing a transaction, different exchange rates, and disagreements over charges.

Balance sheet reconciliationA balance sheet reconciliation supports each ledger balance with independent evidence: a bank statement, an aging, a schedule or a roll-forward. Sign-off.
Accounts receivable reconciliationReconcile accounts receivable by agreeing the general ledger control account to the customer aging, then explaining any difference: unapplied cash, journals.
Accounts payable reconciliationReconcile accounts payable in two directions: the AP aging to the general ledger control account, and each major vendor statement to the ledger.
CutoffCutoff means every transaction is recorded in the period it belongs to: sales when goods ship, purchases when received. How to test cutoff and fix an error.