Lesson 3 of 5
Finance results in both companies
12 min
Third-party and intercompany sales are signed off on their finance results. A logistics flow that completes but posts the wrong amounts, or posts in only one company, is a failed test. This lesson sets out what each scenario should post and what must match.
Third-party: expected postings
| Step | Debit | Credit | Amount (Contoso) |
|---|---|---|---|
| Statistical goods receipt (with shipping notification only) | Cost of goods sold (account-assigned to the sales order) | GR/IR clearing | $3,000 |
| Supplier invoice (without shipping notification) | Cost of goods sold (account-assigned to the sales order) | Supplier Lakeside Components | $3,000 |
| Customer invoice | Customer Great Lakes Fleet Services | Revenue (plus output tax where applicable) | $4,500 |
| Result | Margin on the sales order item | $1,500 |
Because the purchase is account-assigned to the sales order item, the cost does not go into inventory. It lands directly as cost of goods sold (or a similar consumption account) with the sales order, profit center and product attached, so margin analysis can show revenue and cost for the same sale. Check this on the journal entry: the cost line should carry the same profit center and, where you use margin analysis, the same product and customer attributes as the revenue line.
Intercompany: expected postings
| Company code | Document | Debit | Credit | Amount (50 units) |
|---|---|---|---|---|
| 1810 | Goods issue | Cost of goods sold | Inventory | $7,400 |
| 1810 | Intercompany invoice (IV) | Receivable from internal customer (1710) | Intercompany revenue | $8,500 |
| 1710 | Customer invoice | Customer Great Lakes Fleet Services | Revenue | $10,000 |
| 1710 | Incoming intercompany supplier invoice | Cost of goods sold or intercompany purchases | Payable to 1810 | $8,500 |
Two lines in that table must mirror each other: company code 1810's receivable of $8,500 and company code 1710's payable of $8,500. They are the same transaction seen from both sides. Postings between group companies carry a trading partner (the partner company ID), which is what lets group reporting find and eliminate them in consolidation. If the trading partner is missing, the balances cannot be matched automatically.
What must match
- Amounts: 1810 intercompany revenue and receivable equal 1710 intercompany cost and payable.
- Quantities: quantity on the IV invoice equals quantity delivered and billed to the customer.
- Periods: both sides post in the same fiscal period; otherwise the month-end balances differ.
- Trading partner: set on both sides so consolidation can eliminate the pair.
- Tax: the tax treatment matches the legal situation of each company; domestic and cross-border cases differ.
- Does 1810 show a receivable from 1710 for the IV invoice?Yes → check 1710 · No → intercompany billing did not run or did not post
- Does 1710 show a matching payable to 1810?Yes → compare amounts · No → the inbound invoice failed or was not posted
- Are the amounts and periods equal?Yes → check the trading partner · No → timing or pricing difference to investigate
- Is the trading partner set on both sides?Yes → the pair can be eliminated · No → fix master data or account settings before close
SAP S/4HANA offers tools to match and reconcile intercompany balances, such as intercompany matching and reconciliation functions in the finance and group reporting area. Which ones you have depends on your finance scope, so ask the finance process owner which report the controllers use at month end, and use the same one as test evidence.
Returns and credits across companies
The same mirror rule applies when things go backwards. If Great Lakes Fleet Services returns five alternators from an intercompany sale, company code 1710 credits the customer, and an intercompany credit should flow from 1810 to 1710 for the transfer price so both sides reduce by the same amount. If only the customer credit is posted, 1710 has given money back but still owes 1810 the full transfer price. For third-party returns, the supplier must usually accept the return and issue a credit too, or Contoso absorbs the cost. Ask the process owner how each case should be handled, then write those expectations into the test cases.
What would you do?
At Contoso's month-end rehearsal, 1810 shows $85,000 receivable from 1710, but 1710 shows only $76,500 payable to 1810. Luis asks what the likely explanation is.
- Third-party cost is account-assigned to the sales order, so revenue and cost meet on the same item.
- Intercompany: 1810 posts goods issue and IV revenue; 1710 posts customer revenue and intercompany cost.
- The 1810 receivable and the 1710 payable must match in amount, quantity, period and trading partner.
- Use the reconciliation report your controllers use at month end as test evidence.
Check your understanding · not graded
Lesson check
1. Where does the cost of a third-party purchase go?
2. Which two intercompany balances must mirror each other?
3. What does the trading partner on intercompany postings enable?
4. An intercompany pair has equal amounts but posts in different periods. What is the impact?