An intercompany reconciliation format has four parts: a list of balances as each entity has booked them, a balance matrix that puts the whole group on one page, a mismatch register with a reason, an owner and a closure date for every difference, and the draft elimination entries for consolidation. The rule that makes it work is simple: a difference is corrected in the books of the entity that has it wrong, and only then eliminated.
This guide is for the group finance controller or CFO of a multi-entity group running on Tally, SAP or a mix of both. It explains why the balances disagree, shows the format with a worked example, and sets out who should close each difference and when.
If you want the working file rather than the explanation, start here:
| Need | Use this |
|---|---|
| The reconciliation workbook in Excel — matrix, mismatch register and draft elimination entries from your own balances | Intercompany Reconciliation Template |
| A close calendar with the intercompany steps on named days | Month-End Close Checklist Generator |
| The five-day close this reconciliation fits into | Month end closing checklist: a five-day close calendar |
| Foreign-currency balances restated at one closing rate before you compare | Forex Restatement Calculator |
Why group balances never agree
If Holding Co shows ₹185 lakh receivable from Subsidiary A, Subsidiary A should show ₹185 lakh payable to Holding Co. In practice the two figures differ most months, and nearly always for one of five reasons.
| Reason | What happened | How it is fixed |
|---|---|---|
| Timing and goods in transit | One entity recorded an invoice, a dispatch or a payment that the other had not recorded by the cut-off | The entity that has not recorded it books it — as goods in transit or cash in transit — so both sides agree |
| TDS or GST booked on one side | The payer deducted TDS and reduced what it owes, but the payee has not booked the TDS receivable; or one entity carries the balance with GST and the other without | The entity that missed the tax entry books it. The tax becomes a balance with the government, not with the group company |
| Exchange rate | The two entities converted a foreign-currency balance at different rates, or one did not restate it at the closing rate | Circulate one closing rate; restate both sides. Any difference left is an exchange difference under the group's accounting policy, not an intercompany balance |
| Disputed debit note | The entities disagree on a rate, a quantity, a cost recharge or a debit note | Group finance decides before the close. The group can carry only one figure, so one entity books a credit note or an accrual |
| Posting to the wrong party | An entry posted to the wrong party ledger or the wrong entity, posted twice, or for the wrong amount | The entity with the error passes a correcting entry in its own books |
None of these is fixed in the consolidation. Each is fixed in one entity's own books.
The intercompany reconciliation format
1. Balances as booked, one direction at a time
List every pair twice — once in each direction. One line compares what Holding Co shows as receivable from Subsidiary A with what Subsidiary A shows as payable to Holding Co. A separate line compares what Subsidiary A shows as receivable from Holding Co with what Holding Co shows as payable.
Do not compare net balances: if each entity owes the other ₹100 lakh, the net is nil even when both figures are wrong. Reconcile trade balances and intercompany loans separately.
2. The balance matrix
Entities go down the rows and across the columns. Each cell is what the row entity shows as receivable from the column entity, less what it shows as payable to it. A positive figure means the row entity believes it is owed.
The cell for A against B and the cell for B against A should add to nil, and so should the whole matrix. Whatever total remains is the amount that will not eliminate.
3. The mismatch register
Every difference gets a line: the two entities, the two amounts, the reason, the entries that make it up, one owner and one closure date. Open lines are carried into next month's reconciliation until they close.
4. Draft elimination entries
For each direction: debit the payable in the entity that owes, credit the receivable in the entity that is owed. These entries exist only in the consolidation working. They are never posted in either entity's own books.
Worked example: three entities at 30 September 2026
The figures are illustrative, in ₹ lakh, and are the same ones the template opens with. Tolerance is nil.
Balances as booked
| Receivable in the books of | Payable in the books of | Receivable | Payable | Difference | Status |
|---|---|---|---|---|---|
| Holding Co | Subsidiary A | 185.00 | 172.50 | +12.50 | Open — timing |
| Subsidiary A | Holding Co | 40.00 | 40.00 | — | Agreed |
| Holding Co | Subsidiary B | 96.00 | 86.40 | +9.60 | Open — TDS |
| Subsidiary A | Subsidiary B | 61.20 | 64.00 | −2.80 | Open — posting error |
| Subsidiary B | Subsidiary A | 22.00 | 22.00 | — | Agreed |
Five balances compared: two agree, three do not. The differences total 24.90 ignoring sign, and 19.30 net.
The balance matrix
| In the books of (row) / against (column) | Holding Co | Subsidiary A | Subsidiary B | Net position with the group |
|---|---|---|---|---|
| Holding Co | — | +145.00 | +96.00 | +241.00 |
| Subsidiary A | −132.50 | — | +39.20 | −93.30 |
| Subsidiary B | −86.40 | −42.00 | — | −128.40 |
| Column total | −218.90 | +103.00 | +135.20 | +19.30 |
Read one pair. Holding Co believes Subsidiary A owes it a net 145.00 (185.00 receivable less 40.00 payable). Subsidiary A believes it owes a net 132.50. The two cells add to +12.50 rather than nil, so the pair is open. The bottom-right figure, 19.30, is what would be left sitting in the consolidated balance sheet as a receivable from nobody.
What each difference turned out to be
| Pair | Difference | Cause found | Correcting entry, in the entity's own books |
|---|---|---|---|
| Holding Co and Subsidiary A | +12.50 | Holding Co raised an invoice on 29 September; the goods reached Subsidiary A in October | Subsidiary A: debit goods in transit 12.50, credit payable to Holding Co 12.50 |
| Holding Co and Subsidiary B | +9.60 | Subsidiary B deducted TDS when it paid; Holding Co has not booked it | Holding Co: debit TDS receivable 9.60, credit receivable from Subsidiary B 9.60 |
| Subsidiary A and Subsidiary B | −2.80 | Subsidiary B booked one purchase invoice twice | Subsidiary B: debit payable to Subsidiary A 2.80, credit purchases 2.80 |
Elimination entries after the corrections
| No. | Debit | Credit | Amount |
|---|---|---|---|
| 1 | Trade payables — due to Holding Co (books of Subsidiary A) | Trade receivables — due from Subsidiary A (books of Holding Co) | 185.00 |
| 2 | Trade payables — due to Subsidiary A (books of Holding Co) | Trade receivables — due from Holding Co (books of Subsidiary A) | 40.00 |
| 3 | Trade payables — due to Holding Co (books of Subsidiary B) | Trade receivables — due from Subsidiary B (books of Holding Co) | 86.40 |
| 4 | Trade payables — due to Subsidiary A (books of Subsidiary B) | Trade receivables — due from Subsidiary B (books of Subsidiary A) | 61.20 |
| 5 | Trade payables — due to Subsidiary B (books of Subsidiary A) | Trade receivables — due from Subsidiary A (books of Subsidiary B) | 22.00 |
| Total eliminated | 394.60 |
Before the corrections, the template drafts each entry at the lower of the two balances — 382.10 in all — and lists the 24.90 of differences separately, so the unexplained amount stays visible.
Two points are worth keeping. The TDS did not disappear: the 9.60 is now a balance with the tax department in Holding Co's books, and is not eliminated. And the goods in transit stay in group inventory, which is right — the group owns them.
What these entries do not cover
The entries above remove intercompany balances only. Consolidation also removes intercompany sales and purchases, interest and dividends, unrealised profit on stock bought from another group company and still held, and the holding company's investment against the subsidiary's equity. Consolidated financial statements are prepared under Ind AS 110 or AS 21, as applicable to the group; the reconciliation is the working that feeds them, not the accounting conclusion.
Transactions between group companies are also related-party transactions, with their own approval and disclosure requirements; see the Section 188 related-party threshold calculator.
Who owns closure
Differences stay open when both entities think the other one should fix them. Decide the rules once, in writing.
| Question | Rule that works |
|---|---|
| Whose figure is the starting point? | The entity that raised the document. The other entity books from that document, not from its own working |
| Who passes the correcting entry? | The entity whose books are wrong or incomplete — the one that has not booked the invoice, the TDS or the reversal |
| Who decides a dispute? | The group finance controller, before the close, in writing. Neither entity's accountant |
| Who owns each open line? | One named person in one entity, with a date. Not "Subsidiary A accounts team" |
| Who posts the eliminations? | Group finance, in the consolidation working, after the entities confirm their corrected balances |
Tax is settled up front too: both entities carry the balance on the same GST basis, and TDS deducted by the payer is booked by the payee in the same month.
Where it sits in the month-end close
Intercompany differences are cheap to fix in the month they arise and expensive at the year-end, when twelve months of entries have to be ticked. In a five-working-day close the steps fall like this:
| When | Step | Owner |
|---|---|---|
| Two working days before month-end | Each entity sends the other its balance and the list of entries; group finance circulates the closing exchange rate and the cut-off date for intercompany invoices | Entity accountants, group finance |
| Working days 1 to 3 | Tick the two ledgers against each other, book goods in transit and TDS, pass corrections, agree the balances | Entity accountants |
| Working day 3 | Disputes escalated and decided | Group finance controller |
| Working day 4 | Matrix total at nil; eliminations posted in the consolidation | Group finance |
| Working day 5 | Group MIS issued, with any open line shown as an exception | CFO |
The close checklist generator places these on dated working days for your own calendar.
Where the data comes from. In Tally, each group company is a party ledger: take the ledger vouchers and bill-wise outstandings for that party from both companies' books for the same period and tick voucher against voucher. In SAP, group companies are set up as customers and vendors (KNA1, LFA1) with a trading partner, and the line items sit in BSEG, or ACDOCA in S/4HANA. Table availability differs between ECC and S/4HANA, and custom fields vary by implementation. Where one entity is on Tally and another on SAP, agree a common reference — the seller's invoice number — and make both sides record it.
A monthly matrix shows the difference at the cut-off. The step beyond it is matching every intercompany entry to its counterpart as it is posted, so an unmatched entry surfaces the same week with a named owner — the kind of exception CORAA's enterprise intelligence view raises.
Intercompany reconciliation FAQ
What is the format of an intercompany reconciliation?
An intercompany reconciliation has four sheets: balances as booked by each entity in each direction, a balance matrix, a mismatch register with reason, owner and closure date, and the draft elimination entries. The Intercompany Reconciliation Template builds all four from the balances you enter.
How do I do an intercompany reconciliation in Excel in 2026?
List the entities down the rows and across the columns. For each pair and each direction, enter the receivable from one entity's books and the payable from the other's, and take the difference. Put every difference in a register with its reason, an owner and a date, correct it in the entity's books, then draft the elimination entries at the agreed amounts.
What is the elimination entry for intercompany balances?
Debit the intercompany payable in the books of the entity that owes and credit the intercompany receivable in the books of the entity that is owed, for the agreed amount. For loans, debit the borrowing and credit the loan given. The entry is passed in the consolidation working only.
Why do intercompany balances not match?
The usual reasons are timing and goods in transit, TDS or GST booked on one side only, different exchange rates on a foreign-currency balance, a disputed debit note or recharge, and entries posted to the wrong party or posted twice.
Should an unreconciled intercompany difference be adjusted in consolidation?
No. Passing a consolidation adjustment for the difference makes the balance sheet add up and hides the error, which returns larger next period. Find the entries behind it and correct them in the books of the entity that has them wrong.
Related CORAA resources
- Intercompany Reconciliation Template
- Month-End Close Checklist Generator
- Month end closing checklist: a five-day close calendar for Tally and SAP
- MIS report format in Excel: what a CFO should see every month
- Forex Restatement Calculator
Sources
- Companies Act, 2013, Ministry of Corporate Affairs — consolidated financial statements and related-party provisions
- Ind AS 110 (Consolidated Financial Statements) and AS 21 (Consolidated Financial Statements) — both require balances and transactions within the group to be eliminated in full; named here without paragraph references