| Receivable in the books of | Payable in the books of | Receivable amount | Payable amount | Difference | Reason for the difference |
|---|---|---|---|---|---|
| Holding Co | Subsidiary A | +12.5 | |||
| Holding Co | Subsidiary B | +9.6 | |||
| Subsidiary A | Holding Co | Agreed | — | ||
| Subsidiary A | Subsidiary B | −2.8 | |||
| Subsidiary B | Holding Co | — | — | ||
| Subsidiary B | Subsidiary A | Agreed | — |
| In the books of ↓ / against → | Holding Co | Subsidiary A | Subsidiary B | Net with group |
|---|---|---|---|---|
| Holding Co | · | +145 | +96 | +241 |
| Subsidiary A | −132.5 | · | +39.2 | −93.3 |
| Subsidiary B | −86.4 | −42 | · | −128.4 |
| Column total | −218.9 | +103 | +135.2 | +19.3 |
| No. | Debit | Credit | Amount | Basis |
|---|---|---|---|---|
| 1 | Trade payables — due to Holding Co (books of Subsidiary A) | Trade receivables — due from Subsidiary A (books of Holding Co) | 172.5 | Lower of the two balances. Difference of 12.5 (timing / in transit) to be corrected in the entity books first |
| 2 | Trade payables — due to Holding Co (books of Subsidiary B) | Trade receivables — due from Subsidiary B (books of Holding Co) | 86.4 | Lower of the two balances. Difference of 9.6 (tds or gst booked on one side) to be corrected in the entity books first |
| 3 | Trade payables — due to Subsidiary A (books of Holding Co) | Trade receivables — due from Holding Co (books of Subsidiary A) | 40 | Balances agree |
| 4 | Trade payables — due to Subsidiary A (books of Subsidiary B) | Trade receivables — due from Subsidiary B (books of Subsidiary A) | 61.2 | Lower of the two balances. Difference of 2.8 (posting error) to be corrected in the entity books first |
| 5 | Trade payables — due to Subsidiary B (books of Subsidiary A) | Trade receivables — due from Subsidiary A (books of Subsidiary B) | 22 | Balances agree |
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. Groups that close quickly agree intercompany balances before the close rather than during it: each entity sends the other its balance and the list of entries a few days before month-end, and differences are settled while the people who posted them still remember why. That step sits in the month-end close checklist.
Two rules prevent most differences. One entity raises the document and the other books from it — never both from their own workings. And tax is settled up front: whether the balance is inclusive of GST, and that TDS deducted by the payer is booked by the payee in the same month.
Transactions between group companies are also related-party transactions, with their own approval and disclosure requirements under company law and the accounting standards. That is a separate exercise from agreeing the balances: see the Section 188 related-party threshold calculator and the related-party transaction register.
Balances in a foreign currency? Restate them at the closing rate first, or put the group’s position into the monthly MIS format.
Intercompany reconciliation is the check that what one group entity shows as due from another is the same as what that other entity shows as due to it. If Holding Co shows ₹185 lakh receivable from Subsidiary A, Subsidiary A should show ₹185 lakh payable to Holding Co. When the two agree, the balances cancel on consolidation. When they do not, the difference stays in the consolidated balance sheet as a receivable or payable that does not exist outside the group, until someone finds the entry behind it.
This template works one direction at a time. For each ordered pair of entities you enter the receivable from the first entity's books and the payable from the second entity's books. The difference is the receivable side less the payable side. A pair is treated as agreed when the difference is within the tolerance you set; the default is nil. The same layout works for intercompany loans: switch to loan given and loan taken, and run it a second time.
The balance matrix puts the whole group on one page. Each row is an entity's own books; each column is the counterparty. A cell shows the net amount the row entity believes it is owed by, or owes to, the column entity. In a group that reconciles, the cell for A against B and the cell for B against A add to nil, and the total of the matrix is nil. Whatever total is left is the amount that would not eliminate.
For each mismatch you pick the reason — timing or in transit, exchange rate, TDS or GST booked on one side, disputed, or posting error — and the page gives the likely cause and how it is dealt with before elimination. It then drafts the elimination entry for each pair: debit the payable in the debtor entity, credit the receivable in the creditor entity, at the lower of the two balances. The difference is not eliminated; it is corrected in the books of the entity that has it wrong, and the workbook carries it in a register with an owner and a closure date.
Illustrative figures in ₹ lakh. Holding Co sells to Subsidiary A and Subsidiary B; Subsidiary A also sells to Holding Co and to Subsidiary B; Subsidiary B sells to Subsidiary A. Tolerance is nil.
