Auto Elimination

In some circumstances, each Daughter Company will be a separate cost centre that will be invoiced when it uses resources belonging to another Daughter Company. These internal costs and income usually should not be included in turnover figures in the consolidated accounts. They should be removed from the consolidated accounts so that the figures for the group as a whole are correct.

In some cases, you can eliminate internal costs and income simply by using the same Account as the Sales Account in one Daughter and as the Cost Account in the second Daughter, or by consolidating the two Daughter Accounts to the same Account in the Mother Company. Otherwise, you can eliminate the balances of Accounts used for this purpose using the Auto Elimination setting in the Nominal Ledger together with the 'Account Auto Elimination' Maintenance function, available in both the Nominal Ledger and the Consolidation module. You might use this method when internal transactions have been entered as sales in one Daughter and as purchases in another with slightly different values due to exchange rate differences, data entry errors, etc.

You can use the 'Account Auto Elimination' function in two ways:

  1. You can use it in the Mother Company only. In this case you can run the function from the Nominal Ledger or from the Consolidation module. You should use this method if the Mother Company already contains the consolidated account balances from the Daughter Companies (i.e. if you have used the 'Consolidation' export function to export Transaction information from each Daughter Company which you have then imported to the Mother Company.

  2. You can use it in the Mother Company but apply it to all Companies in the database. In this case you must run the function from the Consolidation module. You should use this method if you have the Mother and Daughter Companies in the same database and you will be producing consolidated reports from the Mother Company without physically transferring any Daughter Company information to the Mother Company.
You should use the Auto Elimination setting to define the sets of rules that will inform the Maintenance function how the account elimination task is to be carried out. The function will use the set of rules to create a new record in the Simulation or Transaction register containing the necessary postings. Therefore, once you have defined a particular set of rules, you can use it many times.