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, post the elimination journal, and review consolidated results using normal Versa setup screens and reports, with no custom development required.

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.

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 COGS: When inter-entity sales involve physical products, the buying entity may post to inventory or cost of goods sold rather than a simple expense account. Work with your accountant on how to eliminate those amounts, or use dimensions and account design so inter-entity inventory activity is identifiable on reports.

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.

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.

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. Your elimination amount may need to use COGS or inventory balances instead of expense accounts.

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.

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.

What this article does not cover

Tax, statutory, or audit opinions on which accounts to use for eliminations. Work with your accountant.
Automatic elimination posting (Versa requires manual journals in the elimination entity).
Full equity-method or minority-interest consolidation beyond basic inter-entity revenue and expense elimination.
Custom report development. Standard Financial Reports with dimension filters are sufficient for most firms using Option A above.

Inter-Entity Revenue Elimination