Hi, Could you please explain automatic offset method in AP with an example. Thanks

Dear friend,


Imagine, you are purchasing goods for two companies (C1 & C2) from single supplier.

Here would be your entries in AP:

Charge A/c for C1 : C1-XXX-111 --> 50$
Charge A/c for C2 : C2-YYY-222 --> 50$
Liability A/c @supplier sie : C1-XXX-777

Note:- COA is desiged as Company|Dept|Acct

After creating invoice and generate accounting without any offset method set

C1-XXX-111 Dr. --> 50$
C2-YYY-222 Dr. --> 50$
C1-XXX-777 Cr. --> 100$

>> Since there is only one liability account, liability will be fully allocated to C1

>> If you want AP to automatically allocate liability to both companies, use Automatic offset feature.

>> There are two types of Automatic offset methods (Balancing & Accounting)

>> If you had selected Balancing (Balancing segment will be copied from invoice distribution, and rest segments will be copied from supplier site)

After creating invoice and generate accounting

C1-XXX-111 Dr. --> 50$
C1-XXX-777 Cr. --> 50$
C2-YYY-222 Dr. --> 50$
C2-XXX-777 Cr. --> 50$

>> If you had selected Accounting (only accounting segment will be copied from supplier site, rest sgements will be copied from invoice distribution)

After creating invoice and generate accounting

C1-XXX-111 Dr. --> 50$
C1-XXX-777 Cr. --> 50$
C2-YYY-222 Dr. --> 50$
C2-YYY-777 Cr. --> 50$

>> Based on how client wants the accounting entries to be generated, use either Balancing or Accounting method.

With love,
Raja

Thank Raja. This is a perfect explanation.
I had already typed in my reply without realizing that you have responded in detail. I am pasting my reply below which may serve as another angle to look at this:

Here are examples


COA Structure: Company-Account-Department
Default Liability account: 01-2000-00
Invoice Expense Account: 02-5000-10

Following accounting will be created in three different scenarios:

Example:
Automatic Offsets using the Balancing method

DR: 02-5000-10
CR: 02-2000-00

Example:
Automatic Offsets using the Account method

DR: 02-5000-10
CR: 02-2000-10

Example:
Automatic Offsets disabled

DR: 02-5000-10
CR: 01-2000-00

(Imbalanced journal unless intercompany feature is enabled).

Summary:

If Automatic Offset is enabled then the system uses the same company number in the liability account as given in the expense line.

For all segments other than company and account (department in our case):

The balancing method will keep the segment values in the liability line as they were specified in the default liability account
The account method will copy the segment values from the expense account into the liability line.

Thanks to all. Appreciate it.