Intercompany Transactions
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Very important in Civil Air Patrol financial
accounting
Very confusing
What Are Intercompany Transactions?
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Transactions between components of an
affiliated group filing consolidated financial
statements or tax return
Civil Air Patrol reports using consolidated
financial statements
Civil Air Patrol files an annual group Form
990 with the IRS
Why Are They Important?
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Generally Accepted Accounting Principles
(GAAP) prohibit generating revenue or
expense within a reporting entity through
intercompany transactions
In CAP, we have lots of intercompany
transactions
NHQ payments to wings, squadron
payments to wings, wing payments to
other wings, wing payments to region
So You Might Ask
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Aren’t funds we receive from NHQ for
funded missions revenue for our wing
since we do receive the money?
Aren’t funds we pay to our neighboring
wing expense for our wing since we pay
them the money?
If intercompany revenue and expense is
prohibited by GAAP, why do we bother
recording those transactions?
Posting Intercompany Transactions
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Posted to intercompany revenue and
expense accounts
Intercompany Revenue Accounts
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6400000
6410000
6410100
6410110
6410120
6410200
6410210
6410220
6410230
6410240
6410290
6413000
6413010
6413020
6413030
6413040
6413090
From Units Below National Headquarters
From Regions and Wings
From Regions
From Regions through NHQ
Other Income from Regions
From Wings
Vehicle Maintenance
Mission Reimbursements
Aircraft Fuel
Membership Dues
Miscellaneous
From Units Below
Wing Conference
Encampment
Proficiency Flying
Aircraft Fuel
Miscellaneous
Intercompany Expense Accounts
9435000
• 9436000
• 9436010
• 9436020
• 9436030
• 9436040
• 9436090
• 9437000
• 9437010
• 9437020
• 9437030
• 9437040
• 9437090
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Expenditures with Regions
Expenditures with Wings
Wing Conferences
Encampment
Proficiency Flying
Aircraft Fuel
Miscellaneous
Expenditures with Units Below
Vehicle Maintenance
Mission Reimbursements
Aircraft Fuel
Membership Dues
Miscellaneous
NHQ Intercompany Accounts
63XXXXX
From National Headquarters
• 9434XXX
Expenditures with NHQ
• WFAs are responsible for reconciling all
intercompany transactions with NHQ
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The KEY to Intercompany Transactions
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If you post revenue to an intercompany
revenue account, you or somebody else in
CAP must post an equal expense amount
to an intercompany expense account
Intercompany revenue must equal
intercompany expense in CAP in order to
be eliminated at year end without a
variance
Intercompany Transaction Posting
The fool proof method of ensuring
intercompany transactions remain equal is
to create intercompany invoices (income)
and intercompany bills (expense) at the
same time with the same date.
Intercompany Example
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Cheyenne Sq pays an outside vendor $100
for vehicle maintenance
WY Wing policy is Wing pays for all
corporate vehicle maintenance
WY Wing owes Cheyenne Squadron $100
An invoice is prepared with WY Wing as
the customer for $100
A bill is prepared with Cheyenne Sq as the
vendor for $100
Intercompany Example
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The invoice and bill have the same date
The invoice is posted to account 6410210
(From Wings – vehicle maintenance)
The bill is posted to account 9437010 (Exp
with Units – vehicle maintenance)
Intercompany revenue and expense are
equal on the same date
Payment and receipt of payment will not
affect the revenue and expense date
Test Your Knowledge
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Every Civil Air Patrol Wing must file an
annual report with the IRS
•FALSE
Test Your Knowledge
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SM John Smith pays his squadron dues to
XYZ Squadron. This is considered an
intercompany transaction since John is a
member of Civil Air Patrol
•FALSE
Test Your Knowledge
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Regarding the previous question, XYZ
Squadron deposits the dues money from
John Smith into its squadron WBP sub
account. It then uses that money to pay
XYZ Wing for corporate vehicle use. The
payment to XYZ Wing is an intercompany
transaction
•TRUE
Questions???