Inter-Entity Revenue Elimination: consolidated reporting with an elimination entity

When your company runs more than one legal entity in Versa, each entity keeps its own books. Inter-entity sales and charges are recorded correctly in each entity, but on a group (consolidated) view, that same activity is counted twice: once as revenue in the selling entity and once as expense in the buying entity.

Inter-entity revenue elimination is the month-end step that removes those internal amounts so consolidated financial statements show only activity with outside customers and suppliers. Versa does not post elimination entries automatically; you use a dedicated elimination entity (also called a consolidation entity) and post manual general ledger entries there each period using the standard Draft Transaction screens.

This article explains how to set up that entity, find inter-entity revenue and expense to eliminate, handle inventory markup still on hand, post the elimination journal, and review consolidated results using normal Versa setup screens and reports.

The same close also covers inventory profit still on hand and open receivables and payables between entities. You can prepare all three journals from General Ledger > Inter-Entity Elimination Drafts. You review each draft and post it yourself. Versa does not post these journals automatically. The manual steps later in this article remain available when you want to enter a journal yourself.

Why elimination is required (accounting background)

Understanding why you eliminate inter-entity amounts helps the month-end process make sense, even if your accountant performs the actual journal entries.

Two views of the same business

When a company operates through more than one legal entity, accounting serves two related but different purposes:

Entity-level (statutory) books: Each legal entity must maintain complete, accurate records for its own tax filings, banking, and compliance. When Entity A invoices Entity B, Entity A correctly records revenue and Entity B correctly records expense. Nothing is wrong with those individual books.
Group-level (consolidated) books: Owners, lenders, investors, and boards usually want a single picture of the whole organization. Consolidated financial statements answer: “How did the group perform as one economic unit?”

Versa supports both views. Inter-Entity Transactions keep entity books correct. Elimination entries adjust the consolidated view.

What accounting standards require

Under generally accepted accounting principles (GAAP) in the United States and under IFRS internationally, consolidated financial statements must present a parent and its subsidiaries as if they were a single reporting entity. A key rule follows from that:

Transactions between entities under common control are not revenue or expense to the group as a whole.

From the group’s perspective, money or services moving from one of your entities to another is an internal transfer, like moving cash from one division’s bank account to another’s. No external customer was gained and no external cost was incurred at the group level. If you simply added up each entity’s revenue and expense without adjustment, you would:

Overstate revenue: the same internal charge would appear as sales in the selling entity.
Overstate expense: the same charge would appear as cost in the buying entity.
Mislead readers: margins, revenue growth, and expense ratios would reflect activity that never left the organization.

Consolidation standards therefore require elimination of intercompany balances and intercompany profit and loss before issuing consolidated statements to external parties. Your auditor or CPA will expect eliminations when inter-entity volume is material.

Balance sheet eliminations follow the same logic

The same principle applies to the balance sheet. When Entity A shows a receivable from Entity B and Entity B shows a payable to Entity A, those amounts are owed within the group, not to an outside party. On a consolidated balance sheet, intercompany receivables and payables are eliminated so the group does not appear to owe money to itself.

Revenue and expense elimination (described in this article) addresses the income statement. Balance sheet elimination of intercompany AR and AP is a related step many groups perform in the same consolidation close.

What this means in Versa

Versa does not change how each entity records day-to-day inter-entity invoices and bills. That recording is correct for statutory purposes. Instead, you use an elimination entity to post consolidation-only journal entries that reverse the inter-entity profit and loss (and, if needed, intercompany balance sheet amounts) when you run Consolidated Financial reports.

Those elimination entries are not “fixing errors.” They are the standard accounting step that converts separate legal-entity results into a proper group view for management, lenders, and auditors.

Why use an elimination entity?

Your operating entities (subsidiaries, divisions, or related companies) should continue to invoice and bill each other using Inter-Entity Transactions. That keeps day-to-day AR, AP, revenue, and expense correct for each legal entity.

The elimination entity is different: it should have no regular sales or purchasing activity. It exists only to hold consolidation adjustments: journal entries that offset inter-entity revenue, expense, and (when needed) intercompany balance sheet balances before you run Consolidated Financial reports.

Think of it as the “group reporting” entity where your controller or accountant posts entries that only matter when you look at the whole organization together.

Who can use this?

Your company needs all of the following:

Multiple Internal Organizations (multi-entity) enabled for your firm.
Inter-Entity Transactions enabled as a firm feature (your Versa account must include this add-on; a Firm Admin turns it on in settings (see below).
Consolidated Reports permission for users who run group financials.
Manual GL Transactions and GL Posting permissions for users who create and post elimination journals.

Users who only work in one operating entity do not need access to the elimination entity unless they help with consolidation.

Before you start: one-time setup

1. Create or designate the elimination entity

Many companies add one extra entity, for example, Group Consolidation or Holdings. You may instead use an existing parent or holding company entity if it does not run day-to-day operations in Versa.

Sign in as a Firm Admin.
Open Setup > Company > Entities.
Create the new entity, or open an existing entity to edit it.
On the entity’s Company Information screen, check Include in consolidation.
Check Primary Consolidating Entity for this entity. Only one entity per firm can hold this flag at a time. It is always included in consolidation.
Save.

On each operating entity (the entities that sell, buy, and run inventory), leave Include in consolidation checked so they appear on consolidated reports.

Note: The consolidation checkboxes appear when your firm has more than one entity.

2. Turn on Inter-Entity Transactions and set consolidating currency

These firm-wide options are on the same screen as other company-level settings:

Open Setup > Feature Settings > Company Setting.
Check Inter-Entity Transactions.
When that box is checked, also enable:
- Allow Invoices from One Entity be Automatically created as Bills in another entity
- Allow Purchase Order from One Entity be Automatically created as Sales Order in another entity (if you use the PO-to-SO workflow)
Set Consolidating Currency for Financial Reports to the currency you use for group reporting.
Save.

Consolidated reports convert each entity’s balances into this currency before totaling.

3. Set up inter-entity links between operating entities

Connect entities as customers and suppliers of each other so invoices, bills, and purchase orders flow correctly. See the companion article Inter-Entity Transactions for linking entities and day-to-day workflows.

4. Choose how you will identify inter-entity revenue and expense

Before month-end, decide how you will find the amounts to eliminate. Most companies use one of these approaches (some use both). Both options use only standard Versa setup and reporting; no code changes.

Option A: Dimensions on customers and suppliers (recommended when multi-dimensional reporting is enabled)

Open Setup > Feature Settings > Company Setting for each entity that posts inter-entity activity.
Check Enable Multi-Dimensional Support and save.
Open Setup > Company > Dimensions and create a dimension such as Counterparty Type with options External and Inter-Entity. Optionally add a Related Entity dimension with one option per entity name.
Open Setup > Company > Dimension Assignments and assign those dimensions to Customers, Suppliers, Invoices, Invoice Items, Bills, and Bill Items.
When you link an entity as a customer or supplier in another entity, open that customer or supplier record and set Counterparty Type = Inter-Entity (and Related Entity if you use it) on the dimension fields shown on the form.

When you invoice or bill between entities, Versa carries those dimension tags through to the posted general ledger lines.

To find amounts to eliminate, run a standard financial report in each operating entity (not on the consolidated report):

Open Reports > Financial Reports.
Choose a report such as Income Statement or Trial Balance.
On the report options, use Filter By (and optionally Expand By) to select your Inter-Entity dimension option.
Run the report for the period you are closing.

Repeat in the selling entity (for revenue) and buying entity (for expense). Consolidated Financial reports do not offer the same per-dimension filters; use entity-level financial reports to calculate elimination amounts, then post the journal in the elimination entity and verify the consolidated total afterward.

Option B: Dedicated intercompany general ledger accounts

In each operating entity’s chart of accounts, create separate revenue and expense accounts (for example, Intercompany Revenue and Intercompany Expense). Route inter-entity activity to those accounts using:

The customer’s default revenue account when you create a customer from another entity
Product or product category revenue and expense accounts for inter-entity product lines
Default Expense Account for inter-entity Bills on non-product bill lines (Setup > Feature Settings > Bills)

At month-end, run Financial Reports > Trial Balance or Income Statement in each entity and total those intercompany accounts.

5. Create elimination accounts in the elimination entity

Switch to the elimination entity, then open your chart of accounts setup and add accounts your accountant uses for consolidation journals. Typical examples:

Intercompany revenue elimination (contra-revenue or equity-style account; follow your auditor’s chart structure).
Intercompany expense elimination (contra-expense or equity-style account).
Optional: Intercompany balance sheet clearing accounts if you also eliminate intercompany receivables and payables.

Your accounting advisor should confirm account types and numbering. Versa will post whatever balanced journal you enter against accounts you define here.

If you use Inter-Entity Elimination Drafts, also map those accounts so Versa knows which ones to put on the drafts. Switch to the elimination entity, then open Setup > Feature Settings > General Ledger. Under Inter-Entity Elimination Accounts, choose the accounts and save.

Revenue elimination debit account: the account that removes internal sales from group revenue. Many firms use a contra-revenue account, or Sales if that is your policy.
Expense elimination credit account: the account that removes the matching internal cost. Cost of goods sold or an intercompany expense account is typical.
Inventory profit elimination debit account: usually Cost of goods sold.
Inventory profit elimination credit account: Inventory. Crediting Sales instead leaves the markup in inventory and inflates revenue.
Payable elimination debit account: Accounts Payable, or a payable elimination account that sits with payables on the balance sheet.
Receivable elimination credit account: Accounts Receivable, or a receivable elimination account that sits with receivables on the balance sheet.

Do not use a bad-debt or write-off expense account for receivables and payables. That would record a loss. The correct journal only removes balances the group owes itself, so profit does not change. The drafts post only in the elimination entity. Operating entities keep their own books.

How inter-entity revenue flows (what you are eliminating)

When Entity A invoices Entity B and the invoice is posted with inter-entity automation:

Entity A records revenue and an accounts receivable balance for Entity B (in a customer sub-account).
Entity B receives an unposted bill. When that bill is posted, Entity B records expense (or inventory, for product lines) and an accounts payable balance to Entity A (in a supplier sub-account).

Each entity’s standalone financials are correct. Consolidated revenue and expense are overstated by the inter-entity amount until you post eliminating entries in the elimination entity.

Inventory and product transfers: a second elimination step

When Entity A sells services or a rebillable charge to Entity B, Entity B usually records an expense. Eliminating inter-entity revenue against that expense (Steps 1 to 3 below) is usually enough for the income statement.

When Entity A sells inventory (physical product) to Entity B, Entity B often records an inventory asset at the transfer price, not an immediate expense. Eliminating revenue against “purchase” clears the internal sale from group revenue, but it does not by itself remove any markup still sitting in Entity B’s warehouse. Until Entity B sells those goods to an outside customer, that markup is unrealized profit for the group.

What you are adjusting

Accounting standards expect consolidated inventory to reflect cost to the group (typically Entity A’s cost), not Entity A’s selling price to Entity B. If Entity A sold at cost (no markup), there is no inventory profit to eliminate. If Entity A sold above cost, defer the markup on quantities Entity B still holds at period end.

Simple rule each consolidation close:

Find inter-entity sourced stock still on hand in the buying entity (inventory received from a supplier that is another of your entities).
Markup per unit = transfer price minus Entity A’s true cost for that unit (zero if sold at cost).
Unrealized amount = quantity still on hand × markup per unit.

You eliminate that unrealized amount. You do not eliminate markup × full quantity transferred in the period if some (or all) of it was already sold outside. Quantity sold to outside customers during the period simply reduces what is still on hand.

Provisional journal in the elimination entity

Treat the inventory-profit entry as a provisional consolidation journal that you reset each close to the current unrealized amount. Example: markup $30 per unit, 10 units still on hand:

Debit cost of goods sold (or your income elimination account): $300
Credit inventory (elimination): $300

Next period, recompute remaining on-hand × markup. Reverse the prior provisional and post the new amount, or post only the change. When remaining inter-entity inventory is zero, the provisional is zero. The markup is then recognized in consolidated results for the periods when goods left the group to outside customers.

These journals belong in the elimination entity only. They do not rewrite Entity A or Entity B statutory books.

Note: For FIFO entities, run the Inter-Entity Inventory Profit Remaining report to see quantity still on hand from related entities and unrealized markup. You can then create an inventory profit elimination draft in the consolidating entity, review it, and post. Versa does not post that journal automatically. Extra costs Entity B adds (freight, rework) are usually real group costs; they are not the inter-entity markup itself. Confirm policy with your CPA.

On Inter-Entity Elimination Drafts, that draft debits Cost of goods sold and credits Inventory. Credit Inventory, not Sales. Versa sets the draft to reverse on the first day of the next period. At the next close, create a new draft from whatever quantity is still on hand. Units sold to an outside customer drop out of the next draft, so that profit is no longer removed.

Inventory costing: prefer FIFO

To identify which on-hand quantity still came from another entity, Versa needs inventory that stays tied to receiving documents. That works cleanly when the buying entity uses FIFO (or another receipt-layer costing method).

We strongly recommend FIFO for entities that buy material product volume from related entities above cost and that eliminate unrealized inventory profit at consolidation. With FIFO, remaining stock from an inter-entity supplier can be identified from the receipt and purchase order chain.

With average costing, Versa typically keeps one inventory balance per part. Purchases from related entities and from outside suppliers mix into the same quantity, so you cannot isolate inter-entity stock exactly.

If you must eliminate under average cost, use this estimation order:

Default: purchase-mix ratio. Ending quantity × (inter-entity receipt quantity ÷ all receipt quantity) for the period (or another window your accountant sets). Then apply markup per unit.
IC-only parts: if that part is only ever received from a related entity, treat all ending quantity as inter-entity.
Exception: recent-receipt assumption (treat ending inventory as the newest receipts) only when the mix is lumpy and ratio would clearly misstate. Document that override with your accountant.

For accurate, auditable inventory-profit elimination, adopt FIFO on the buying entity where practical.

The accounting for each elimination

All three journals are posted only in the elimination entity. Entity A and Entity B keep the invoices, bills, inventory, receivables, and payables they already recorded. Consolidated reports add every entity, including these journals, and that combined total is the group view.

Use one internal sale for all three. Entity A’s cost is $70 a unit. Entity A invoices Entity B $100 a unit for 10 units ($1,000). Entity B still holds all 10 at period end, and the invoice is still unpaid. Ignore tax until the note at the end of this section.

Before any elimination, adding the two sets of books shows:

Sales $1,000 and cost of goods sold $700 on Entity A. Entity A’s profit is $300.
Inventory $1,000 and accounts payable $1,000 on Entity B. Entity B has not sold the goods, so Entity B has no profit.
Accounts receivable $1,000 on Entity A.

The group did not sell anything to an outside customer. Group profit should be zero. Group inventory should still be the $700 it cost Entity A. The group should not show a receivable and a payable to itself.

1. Revenue and purchase

This journal removes the internal sale from the income statement. The amount is the invoice and bill before tax.

Debit the revenue elimination account: $1,000
Credit the expense elimination account: $1,000

Group sales fall by $1,000. Group expense falls by $1,000. Profit does not change from this journal alone. The $300 markup is still in the picture, because Entity A already recorded $700 of cost of goods sold and Entity B is holding the goods at $1,000. The next journal deals with that markup.

This journal does not reverse next period. It records activity that happened in this period. Next period, you eliminate only the new internal sales.

2. Inventory profit

Goods still inside the group should be carried at what they cost the group, not at the price one entity charged another. Unrealized markup is 10 units × ($100 − $70) = $300.

Debit Cost of goods sold: $300
Credit Inventory: $300

The debit puts the seller’s profit back into cost, so group profit for this internal sale becomes zero. The credit takes that same $300 out of inventory. Entity B’s $1,000 inventory minus this $300 leaves $700, which is Entity A’s cost.

Credit Inventory, not Sales. A credit to Sales would increase revenue. The cost debit would cancel it on the income statement, and the goods would stay on the balance sheet at the $1,000 transfer price.

This journal reverses on the first day of the next period. The reversal puts the $300 back into inventory and takes it back out of cost. You then draft again from the quantity still on hand.

If all 10 units are still in the warehouse, the new draft is another $300. Reversal and new draft cancel, and the profit stays deferred.
If 6 units were sold to an outside customer and 4 remain, the new draft is only 4 × $30 = $120. The other $180 stays recognized, because those units left the group.
If none remain, you do not draft again. The reversal is the last step, and the $300 of profit is in the period when the goods were sold outside.

The reversal is not because Versa cannot tell whether the goods were sold. The next draft simply omits units that are no longer on hand.

3. Receivables and payables

Entity A is owed $1,000. Entity B owes $1,000. On a combined balance sheet those two amounts are the same debt counted once as an asset and once as a liability. Remove both.

Debit Accounts Payable: $1,000
Credit Accounts Receivable: $1,000

Assets go down. Liabilities go down by the same amount. Profit does not change. This is not a bad-debt write-off. A write-off would debit an expense and credit only the receivable, which would create a loss and leave Entity B’s payable on the group balance sheet.

Use the open balance at the end of the period, including tax. Tax sits in the receivable and the payable, so it has to come out of both or the two sides will not match. The seller’s tax owed to the government stays. You are not eliminating a tax liability.

If one side has been partly paid, eliminate only the smaller open amount. The unmatched remainder stays until the documents agree.

This journal also reverses on the first day of the next period. At the next close you measure what is still unpaid and draft that amount. Pairs that were paid drop out. You do not leave last period’s elimination sitting on the books all year.

Where the group stands after all three

Sales: the internal $1,000 is gone.
Profit: zero on this internal sale, until the goods are sold outside the group.
Inventory: $700, Entity A’s cost.
Receivable and payable: the internal $1,000 is gone from the combined balance sheet at period end.
Entity A and Entity B: unchanged. Their own statements still show the sale, the inventory at $1,000, and the unpaid invoice.

Tax. The revenue journal uses the amount before tax, because tax is not revenue. The receivable and payable journal uses the open balance including tax, because that is what is sitting in accounts receivable and accounts payable. Charge the same tax on both the invoice and the bill, or the open amounts will differ and only the smaller amount will be drafted.

Month-end on Inter-Entity Elimination Drafts

After inter-entity invoices and bills for the period are posted, switch to the elimination entity (the one marked Primary Consolidating Entity). Open General Ledger > Inter-Entity Elimination Drafts.

Choose the Accounting period and select Refresh preview. The screen shows three areas. Each Create button makes a draft. Open the draft, confirm the accounts and amounts, then post it. Nothing posts by itself.

Revenue and purchase

This area lists linked invoice and bill pairs in the period whose amounts agree before tax. Tax stays on each entity. It is not part of this elimination.

Use Full report to open Inter-Entity Invoice Bill Reconciliation if a pair is missing or the amounts do not match. Fix the documents in the operating entities first.
Select Create revenue elimination draft.
The draft debits the revenue elimination account and credits the expense elimination account for the before-tax total.
Review and post. This journal does not reverse next period. The next period gets its own draft for new pairs.

Inventory profit

This area lists inter-entity product still on hand in the buying entity, valued at the markup still in that stock. It applies when the buying entity uses FIFO.

Use Full report to open Inter-Entity Inventory Profit Remaining and review quantity, markup, and amount.
Select Create inventory elimination draft.
The draft debits Cost of goods sold and credits Inventory, with one pair of lines for each part.
Review and post. The draft reverses at the start of the next period. Then create a new draft from the quantity still on hand.

If goods were transferred at cost, markup is zero and this area stays empty. You can still eliminate the revenue and purchase.

Receivables and payables

This area removes open balances between entities from the combined balance sheet. It is not a write-off. Profit does not change.

Balances are measured at the end of the accounting period you selected. A document dated after that day is left out. A payment after that day is not subtracted. Amounts include tax, because tax is part of the open receivable and payable. An older invoice that is still unpaid on that day stays on the list.

Use Full report to open Inter-Entity Receivable Payable Balances. Linked pairs show both the open receivable and the open payable. A balance with no matching document on the other side is listed and is not drafted.
Select Create balance elimination draft.
The draft debits Accounts Payable and credits Accounts Receivable (or the elimination accounts you mapped). When the two open amounts differ, Versa uses the smaller amount.
Review and post. The draft reverses at the start of the next period. Then create a new draft from whatever is still unpaid.

Month-end: eliminate inter-entity revenue and expense

Perform these steps after all inter-entity invoices and bills for the period are posted in the operating entities.

Step 1: Reconcile inter-entity activity

For each entity pair (or in total, if your policy allows):

In the selling entity, find inter-entity revenue for the period (dimension filter Inter-Entity on Financial Reports, or total your intercompany revenue accounts).
In the buying entity, find matching inter-entity expense (or inventory/COGS, if applicable) for the same period.
Confirm the amounts match. Small differences may be timing (invoice posted in one month, bill in the next), foreign exchange, or rounding. Resolve before posting eliminations.

Inter-entity invoices and bills are linked in Versa. If totals do not agree, open the invoice in the selling entity and confirm the related bill exists and is posted in the buying entity.

Step 2: Switch to the elimination entity

Use the entity selector at the top of Versa and choose your elimination / consolidation entity (the one marked Primary Consolidating Entity).

Step 3: Create the elimination journal

Open General Ledger > New Transaction.
Set the transaction date to the last day of the period you are closing (or the date your policy requires).
Enter a clear description, for example: Inter-entity revenue and expense elimination, [Month Year].
Add lines that reverse the inter-entity profit and loss effect for the group. A common pattern when Entity A sold $10,000 of services to Entity B:

Debit your intercompany revenue elimination account: $10,000
Credit your intercompany expense elimination account: $10,000

Your accountant may instead debit and credit revenue and expense accounts directly, or net to a single investment in subsidiaries / elimination equity account. Follow your consolidation policy; Versa records whatever balanced journal you post.

Combine lines for all entity pairs and inter-entity activity types (management fees, rebilled expenses, internal services, and so on) until the totals match what you identified in Step 1.

Step 4: Post the journal

Review that debits equal credits.
Save the draft transaction, then post it (users need GL Posting permission).

Posted elimination entries live only in the elimination entity. Operating entities are unchanged. You can review or edit unposted drafts under General Ledger > Draft Transactions.

Step 5: (Optional) Eliminate intercompany balance sheet balances

Revenue and expense elimination removes double-counted profit and loss on consolidated statements. You may also need to eliminate intercompany accounts receivable and accounts payable on a consolidated balance sheet.

In the same elimination entity, post an additional manual journal for each matched pair:

Debit intercompany accounts payable (liability between entities)
Credit intercompany accounts receivable (asset between entities)

Amounts should net to zero when inter-entity invoicing and billing are in balance. Your accountant can help design the balance sheet elimination accounts if you consolidate balance sheets as well as income statements.

You can prepare the same journal from Receivables and payables on Inter-Entity Elimination Drafts. That draft uses the smaller open amount as of the period end, including tax, and it reverses at the start of the next period. It is not a write-off, and it does not change profit.

Step 6: Run consolidated financial reports

Open Reports > Consolidated Financial.
Choose the report (for example, Income Statement or leave the default Trial Balance) and the period.
Run the report.

Consolidated reports show each included entity and a consolidated total column. The elimination entity’s journals are included in that total. After correct eliminations, inter-entity revenue and expense should no longer inflate group results.

Consolidated reports also apply currency translation and retained-earnings adjustments for multi-currency groups. Posting elimination journals each period remains your responsibility.

Example at a glance

Setup: Entities A, B, and C are operating entities. Entity Group is the elimination entity (Primary Consolidating Entity). Customers linked to other entities are tagged Counterparty Type = Inter-Entity.

During the month: Entity A invoices Entity B $5,000 for shared IT services. Entity B’s bill is created and posted automatically.

Before elimination (consolidated view): Group revenue includes $5,000 (Entity A). Group expense includes $5,000 (Entity B). Group profit is unchanged, but revenue and expense are both overstated.

Month-end in Entity Group: Post manual journal: Debit revenue elimination $5,000, Credit expense elimination $5,000.

After elimination: Run Consolidated Financial again. The group income statement should no longer show that internal $5,000 in both revenue and expense.

Product example: markup still in inventory

During the month: Entity A sells goods to Entity B. Entity A’s cost is $70 per unit; the inter-entity invoice is $100 per unit (markup $30). Entity B receives 10 units into inventory and still holds all 10 at month-end.

Month-end in Entity Group (in addition to eliminating the $1,000 of inter-entity revenue/purchase): Unrealized markup = 10 × $30 = $300. Post provisional journal: Debit COGS (or income elimination) $300, Credit inventory elimination $300.

Later: Entity B sells 6 units to an outside customer. At the next close, 4 units remain. Unrealized = 4 × $30 = $120. Reset the provisional to $120 (net effect: $180 of previously deferred profit is recognized in consolidated results for that period). When the last units are sold outside, unrealized returns to zero.

Inter-Entity Transactions and elimination

Inter-Entity Transactions automates operational documents (invoice-to-bill, purchase-order-to-sales-order) so you do not enter the same transaction twice in each entity. Elimination is a separate, period-end accounting step for group reporting.

See the companion help center articles:

Inter-Entity Transactions: linking entities, settings, and day-to-day workflows.
Transfer Fixed Asset between two Entities: if you move assets between entities (a different workflow from revenue elimination).

When inter-entity revenue and expense do not match

Before you post elimination journals, inter-entity revenue in the selling entity and matching expense (or inventory/COGS) in the buying entity for the same period should agree. If your reports show different totals, fix the underlying documents in the operating entities first. Do not post a single balanced elimination amount until you understand the difference.

Find where the difference is

Run your inter-entity filter report in the selling entity for the period. Note total revenue.
Run the same type of report in the buying entity for the same period. Note total expense or COGS.
Subtract to get the variance.
On a posted inter-entity invoice in the selling entity, check Linked With Bill in Entity [name] for the related bill number.
Switch to the buying entity and open that bill. Compare invoice date, bill date, line amounts, and whether the bill is posted.

Work invoice by invoice until the variance is explained.

Common causes and how to fix them

Bill not posted in the buying entity

The selling entity recorded revenue when the invoice was posted. The buying entity does not record expense until the bill is posted.

Switch to the buying entity.
Open the linked bill (use the bill number from the invoice, or find it under Accounts Payable).
Confirm line amounts match the invoice.
Post the bill.
Re-run your inter-entity reports in both entities.

Invoice and bill fall in different periods

The seller may have posted in one month while the buyer posted in the next. Each entity’s statutory books may still be correct, but your elimination for the earlier month will not include the expense side (or the reverse).

Option A (when the bill is still unposted): Align dates before posting. Set the bill bill date and effective date to match the invoice period, then post in the buying entity.

Option B (when both sides are already posted): Follow your accountant’s policy. You may eliminate only the amount that belongs in the current period, or post a manual journal in one operating entity to move the activity into the correct period before elimination.

Line amounts do not match

Quantity, price, or discounts may have been changed on only one side after the bill was created.

If the bill is not posted yet:

In the buying entity, edit the bill lines so they match the posted invoice.
Post the bill.
Re-run your inter-entity reports.

If both the invoice and bill are already posted:

Do not change posted documents unless your workflow allows unposting.
Work with your accountant. Typical fixes include a credit memo or debit memo on the selling side, an adjusting bill or manual journal on the buying side, or a correcting entry in the next period.
Re-run inter-entity reports after corrections are posted.

Expense posted to inventory or prepayment instead of expense

Inter-entity product bills may post to inventory or prepayment until goods are received, while the seller already recognized revenue. Revenue and expense totals will not line up until receiving and billing are complete.

In the buying entity, complete receiving or link bill lines to shipment receipts as your purchasing workflow requires.
Post or adjust the bill so cost hits the expected expense or COGS account.
Re-run reports. For income-statement elimination of the internal sale, match document totals first. If goods remain in inventory, also post the inventory-profit provisional described in Inventory and product transfers above.

No linked bill was created

On the invoice in the selling entity, if there is no Linked With Bill in Entity [name] section, the buying entity may not have a bill yet.

For future invoices, confirm Create as Bill in Entity [name] when Posted is checked on the invoice before posting.
For an already-posted invoice without a bill, switch to the buying entity and create a manual bill to the linked supplier, matching invoice lines, dates, and amounts.
Post the bill, then re-run inter-entity reports in both entities.

Dimension or account tags missing on one side

Transactions may be missing from your Inter-Entity dimension filter in one entity only.

Open the customer (selling side) or supplier (buying side) and set Counterparty Type = Inter-Entity (and Related Entity if you use it).
For past periods, also search by intercompany GL accounts if you use dedicated accounts from setup Option B.

Post elimination when a small difference remains

After you fix every document you can, a small remaining difference may still exist (foreign exchange, rounding, or timing your policy accepts). Your accountant should decide the amount to eliminate.

When amounts match: Post the elimination journal for the paired amount (for example, $10,000 revenue and $10,000 expense).

When a difference remains: In the elimination entity, add a balancing line to an intercompany reconciliation or elimination clearing account your accountant defines. Example: the seller shows $10,000 revenue and the buyer shows $9,980 expense after foreign exchange:

Debit revenue elimination: $10,000
Credit expense elimination: $9,980
Credit intercompany clearing: $20

State the reason in the journal description (for example, FX rounding on Entity A to Entity B, December 2025).

After operating-entity fixes, re-run Financial Reports in both entities, confirm totals align with your policy, then complete Steps 3 through 6 in the month-end section above. You can also return to Inter-Entity Elimination Drafts and create the drafts again.

If consolidated amounts still look wrong

Elimination entity not selected when posting: Journals must be created while the elimination entity is active in the entity selector.
Elimination entity not included in consolidation: Confirm Include in consolidation is checked on the elimination entity and on operating entities.
Journal not posted: Draft transactions do not affect consolidated totals until posted.
Wrong elimination account types: If elimination accounts are not set up with the types your income statement expects, consolidated lines may not move as intended. Review with your accountant.
Amounts do not match between entities: See When inter-entity revenue and expense do not match above. Fix unposted bills, period cutoffs, or line differences in operating entities before posting eliminations.
Cannot find inter-entity revenue: Confirm customers and suppliers are tagged (dimensions) or transactions use intercompany GL accounts. External customer revenue will mix in if tags or accounts are missing.
Dimension filter not available on a report: Confirm Enable Multi-Dimensional Support is on for that entity and the dimension is assigned to the report’s model (for example, Customers or GlAccount). Run the report from Financial Reports in the operating entity, not Consolidated Financial.
No Consolidated Financial menu: Your user may lack Consolidated Reports permission, or the firm may not have multi-entity features enabled.
Cannot create manual journals: Ask your administrator for Manual GL Transactions and GL Posting.
Inter-Entity Transactions options are missing: Your firm may not have the Inter-Entity Transactions feature enabled on its Versa plan, or Inter-Entity Transactions is not checked under Company Setting.

Tips

Tag inter-entity customers and suppliers when you link entities so every future invoice and bill is easy to filter.
Use a consistent journal description each month (include period and “inter-entity elimination”) so auditors can find entries quickly.
Reconcile entity pairs before posting eliminations. Fix unposted bills or mismatched amounts in operating entities first.
Start with one entity pair in your first close, then expand once the process is stable.
Keep a simple spreadsheet mapping each operating entity’s inter-entity totals to your elimination journal lines until the routine is familiar.
For product transfers on FIFO entities, run Inter-Entity Inventory Profit Remaining before creating the inventory profit elim draft so you can review on-hand × markup. On that draft, credit Inventory, not Sales.
For open balances between entities, use Receivables and payables on Inter-Entity Elimination Drafts. Debit Accounts Payable and credit Accounts Receivable. Do not post that amount to a write-off expense.
If you transfer inventory between entities at cost, you can skip the inventory-profit provisional (markup is zero). You may still eliminate inter-entity revenue against purchase for presentation.
Prefer FIFO inventory costing on entities that receive inter-entity product above cost, so remaining related-entity stock can be identified without estimating under average cost.

What this article does not cover

Tax, statutory, or audit opinions on which accounts to use for eliminations. Work with your accountant.
Automatic posting of elimination journals. Versa can prepare drafts from linked pairs and from FIFO inventory profit remaining; your controller still reviews and posts.
Full equity-method or minority-interest consolidation beyond basic inter-entity revenue, expense, and inventory-profit elimination.
Automatic posting of receivable and payable elimination. Versa can draft that journal from open balances as of the period end. Your controller still reviews and posts.
Custom report development. Standard Financial Reports with dimension filters are sufficient for most firms using Option A above.