Organizations that include multiple legal entities can create and manage payments by using a single legal entity that handles all payments. Therefore, the same payments don't have to be entered in multiple legal entities. This article provides examples that show how posting for centralized payments is handled in various scenarios.
In a centralized payments organization, there are many legal entities for operations, and each operating legal entity manages its own vendor invoices. Payments for all the operating legal entities are generated from a single legal entity, which is known as the legal entity of the payment. During the settlement process, the applicable due-to and due-from transactions are generated. You can specify which legal entity in the organization receives the realized gain or realized loss transactions, and how cash discount transactions that are related to a cross-company payment are handled. On the centralized payment journal line, the Account type should be set to Vendor. The Offset account type should be set to Bank or Ledger. The bank account should be in the current company.
The following examples illustrate how posting is handled in various scenarios. The following configuration is assumed for all these examples:
The legal entities are Fabrikam, Fabrikam East, and Fabrikam West. Payments are made from Fabrikam.
The Post cash discount field on the Intercompany accounting page is set to Legal entity of the invoice.
The Post currency exchange gain or loss field on the Intercompany accounting page is set to Legal entity of the payment.
The vendor Fourth Coffee is set up as a vendor in each legal entity. The vendors from the various legal entities are identified as the same vendor because they share the same global address book ID.
Directory ID
Vendor account
Name
Legal entity
1050
3004
Fourth Coffee
Fabrikam
1050
100
Fourth Coffee
Fabrikam East
1050
3004
Fourth Coffee
Fabrikam West
Example 1: Vendor payment of invoice from another legal entity
Fabrikam East has an open invoice for vendor account 100, Fourth Coffee. Fabrikam enters and posts a payment to Fabrikam vendor account 3004, Fourth Coffee. The payment is settled with the open invoice.
Invoice is posted in Fabrikam East for vendor 100
Account
Debit amount
Credit amount
Expense (Fabrikam East)
600.00
Accounts payable (Fabrikam East)
600.00
Payment is generated and posted in Fabrikam for vendor 3004
Account
Debit amount
Credit amount
Accounts payable (Fabrikam)
600.00
Cash (Fabrikam)
600.00
Fabrikam payment is settled with Fabrikam East invoice
Fabrikam posting
Account
Debit amount
Credit amount
Due from Fabrikam East (Fabrikam)
600.00
Accounts payable (Fabrikam)
600.00
Fabrikam East posting
Account
Debit amount
Credit amount
Accounts payable (Fabrikam East)
600.00
Due to Fabrikam (Fabrikam East)
600.00
Example 2: Vendor payment of invoice from another legal entity with cash discount
Fabrikam East has an open invoice for vendor 100, Fourth Coffee. The invoice has a 20.00 cash discount available. Fabrikam enters and posts a payment of 580.00 for Fabrikam vendor 3004, Fourth Coffee. The payment is settled with the open Fabrikam East invoices. The cash discount is posted to the legal entity of the invoice, Fabrikam East.
Invoice is posted in Fabrikam East for Fabrikam East vendor 100
Account
Debit amount
Credit amount
Expense (Fabrikam East)
600.00
Accounts payable (Fabrikam East)
600.00
Payment is generated and posted in Fabrikam for Fabrikam vendor 3004
Account
Debit amount
Credit amount
Accounts payable (Fabrikam)
580.00
Cash (Fabrikam)
580.00
Fabrikam payment is settled with Fabrikam East invoice
Fabrikam posting
Account
Debit amount
Credit amount
Due from Fabrikam East (Fabrikam)
580.00
Accounts payable (Fabrikam)
580.00
Fabrikam East posting
Account
Debit amount
Credit amount
Accounts payable (Fabrikam East)
580.00
Due to Fabrikam (Fabrikam East)
580.00
Accounts payable (Fabrikam East)
20.00
Cash discount (Fabrikam East)
20.00
Example 3: Vendor payment of invoice from another legal entity with realized exchange rate loss
Fabrikam East has an open invoice for vendor 100, Fourth Coffee. Fabrikam enters and posts a payment for Fabrikam vendor 3004, Fourth Coffee. The payment is settled with the open Fabrikam East invoice. A currency exchange loss transaction is generated during the settlement process.
Exchange rate for euros (EUR) to U.S. dollars (USD) as of the invoice date: 1.2062
Exchange rate for EUR to USD as of the payment date: 1.2277
Invoice is posted in Fabrikam East for Fabrikam East vendor 100
Account
Debit amount
Credit amount
Expense (Fabrikam East)
600.00 EUR / 723.72 USD
Accounts payable (Fabrikam East)
600.00 EUR / 723.72 USD
Payment is generated and posted in Fabrikam for Fabrikam vendor 3004
Account
Debit amount
Credit amount
Accounts payable (Fabrikam)
600.00 EUR / 736.62 USD
Cash (Fabrikam)
600.00 EUR / 736.62 USD
Fabrikam payment is settled with Fabrikam East invoice
Fabrikam posting
Account
Debit amount
Credit amount
Due from Fabrikam East (Fabrikam)
600.00 EUR / 736.62 USD
Accounts payable (Fabrikam)
600.00 EUR / 736.62 USD
Realized loss (Fabrikam)
0.00 EUR / 12.90 USD
Due from Fabrikam East (Fabrikam)
0.00 EUR / 12.90 USD
Fabrikam East posting
Account
Debit amount
Credit amount
Accounts payable (Fabrikam East)
600.00 EUR / 736.62 USD
Due to Fabrikam (Fabrikam East)
600.00 EUR / 736.62 USD
Due to Fabrikam (Fabrikam East)
0.00 EUR / 12.90 USD
Accounts payable (Fabrikam East)
0.00 EUR / 12.90 USD
Example 4: Vendor payment of invoice from another legal entity with cash discount and realized exchange rate loss
Fabrikam East has an open invoice for vendor 100, Fourth Coffee. The invoice has a cash discount available, and a sales tax transaction is generated. Fabrikam posts a payment for Fabrikam vendor 3004, Fourth Coffee. The payment is settled with the open Fabrikam East invoice. A currency exchange loss transaction is generated during the settlement process. The cash discount is posted to the legal entity of the invoice (Fabrikam East), and the currency exchange loss is posted to the legal entity of the payment (Fabrikam).
Exchange rate for EUR to USD as of the invoice date: 1.2062
Exchange rate for EUR to USD as of the payment date: 1.2277
Invoice is posted and a tax transaction is generated in Fabrikam East for vendor 100
Account
Debit amount
Credit amount
Expense (Fabrikam East)
564.07 EUR / 680.38 USD
Sales tax (Fabrikam East)
35.93 EUR / 43.34 USD
Accounts payable (Fabrikam East)
600.00 EUR / 723.72 USD
Payment is generated and posted in Fabrikam for vendor 3004
Account
Debit amount
Credit amount
Accounts payable (Fabrikam)
588.72 EUR / 722.77 USD
Cash (Fabrikam East)
588.72 EUR / 722.77 USD
Fabrikam payment is settled with Fabrikam East invoice
Fabrikam posting
Account
Debit amount
Credit amount
Due from Fabrikam East (Fabrikam)
588.72 EUR / 722.77 USD
Accounts payable (Fabrikam)
588.72 EUR / 722.77 USD
Realized loss (Fabrikam)
0.00 EUR / 12.66 USD
Due from Fabrikam East (Fabrikam)
0.00 EUR / 12.66 USD
Fabrikam East posting
Account
Debit amount
Credit amount
Accounts payable (Fabrikam East)
588.72 EUR / 722.77 USD
Due to Fabrikam (Fabrikam East)
588.72 EUR / 722.77 USD
Due to Fabrikam (Fabrikam East
0.00 EUR / 12.66 USD
Accounts payable (Fabrikam East)
0.00 EUR / 12.66 USD
Accounts payable (Fabrikam East)
11.28 EUR / 13.61 USD
Cash discount (Fabrikam East)
11.28 EUR / 13.61 USD
Example 5: Vendor credit note with primary payment
Fabrikam generates a payment of 75.00 for vendor 3004, Fourth Coffee. The payment is settled with an open invoice for Fabrikam West vendor 3004 and an open credit note for Fabrikam East vendor 100. The payment is selected as the primary payment on the Settle transactions page.
Invoice is posted to Fabrikam West for vendor 3004
Account
Debit amount
Credit amount
Expense (Fabrikam West)
100.00
Accounts payable (Fabrikam West)
100.00
Credit note is posted to Fabrikam East for vendor 100
Account
Debit amount
Credit amount
Accounts payable (Fabrikam East)
25.00
Purchase returns (Fabrikam East)
25.00
Payment is posted to Fabrikam for vendor 3004
Account
Debit amount
Credit amount
Accounts payable (Fabrikam)
75.00
Cash (Fabrikam)
75.00
Fabrikam payment is settled with Fabrikam West invoice and Fabrikam East credit note
Fabrikam posting
Account
Debit amount
Credit amount
Accounts payable (Fabrikam)
25.00
Due to Fabrikam East (Fabrikam)
25.00
Due from Fabrikam West (Fabrikam)
100.00
Accounts payable (Fabrikam)
100.00
Fabrikam East posting
Account
Debit amount
Credit amount
Due from Fabrikam (Fabrikam East)
25.00
Accounts payable (Fabrikam East)
25.00
Fabrikam West posting
Account
Debit amount
Credit amount
Accounts payable (Fabrikam West)
100.00
Due to Fabrikam (Fabrikam West)
100.00
Example 6: Vendor credit note without primary payment
Fabrikam generates a payment of 75.00 for vendor 3004, Fourth Coffee. The payment is settled with an open invoice for Fabrikam West vendor 3004 and an open credit note for Fabrikam East vendor 100. The payment isn't selected as the primary payment on the Settle transactions page.
Invoice is posted to Fabrikam West for vendor 3004
Account
Debit amount
Credit amount
Expense (Fabrikam West)
100.00
Accounts payable (Fabrikam West)
100.00
Credit note is posted to Fabrikam East for vendor 100
Account
Debit amount
Credit amount
Accounts payable (Fabrikam East)
25.00
Purchase returns (Fabrikam East)
25.00
Payment is posted to Fabrikam for vendor 3004
Account
Debit amount
Credit amount
Accounts payable (Fabrikam)
75.00
Cash (Fabrikam)
75.00
Fabrikam payment is settled with Fabrikam West invoice and Fabrikam East credit note
Fabrikam posting
Account
Debit amount
Credit amount
Due from Fabrikam West (Fabrikam)
75.00
Accounts payable (Fabrikam)
75.00
Fabrikam East posting
Account
Debit amount
Credit amount
Due from Fabrikam West (Fabrikam East)
25.00
Accounts payable (Fabrikam East)
25.00
Fabrikam West posting
Account
Debit amount
Credit amount
Accounts payable (Fabrikam West)
75.00
Due to Fabrikam (Fabrikam West)
75.00
Accounts payable (Fabrikam West)
25.00
Due to Fabrikam East (Fabrikam West)
25.00
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