1. Intercompany Accounting For Wings
Very important in Civil Air Patrol financial accounting
Can be very confusing

2. What Are Intercompany Transactions?
Transactions between components of an affiliated group filing consolidated financial statements or tax return
Civil Air Patrol does report using consolidated financial statements
Civil Air Patrol does file an annual group Form 990 with the IRS

3. Why Are They Important To Us?
Accounting guidelines 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, wings payments to other wings, wings payments to regions are all intercompany transactions

4. Posting Intercompany Transactions
Our focus is transactions below NHQ level
Revenue between regions, wings and units gets posted to an account beginning with 65
Expense between regions, wings and units gets posted to an account beginning with 95
Only intercompany transactions get posted to 65 income and 95 expense accounts

5. Intercompany Revenue Accounts
From Units Below National Headquarters
From Regions and Wings
From Regions
From Regions through NHQ
Other Income from Regions
From Wings
Proficiency Flying
Aircraft Fuel
Vehicle Maintenance
Vehicle Fuel
Mission Reimbursements
Membership Dues
Activities
Miscellaneous
From Units Below
Proficiency Flying
Aircraft Fuel
Vehicle Maintenance
Vehicle Fuel
Mission Reimbursements
Membership Dues
Wing Conference
Encampment
Miscellaneous

6. Intercompany Expense Accounts
Expenditures with Regions
Aircraft Maintenance
Aircraft Fuel
Vehicle Maintenance
Vehicle Fuel
Mission Reimbursements
Membership Dues
Website Hosting
Region Activities
Region Conference
Miscellaneous
Expenditures with Wings
Proficiency Flying
Aircraft Fuel
Vehicle Maintenance
Vehicle Fuel
Mission Reimbursements
Membership Dues
Wing Conferences
Encampment
Miscellaneous

7. Intercompany Expense Accounts Cont.
Expenditures with Units Below
Proficiency Flying
Aircraft Fuel
Vehicle Maintenance
Vehicle Fuel
Mission Reimbursements
Membership Dues
Encampment
Scholarships
Unit Activities
Miscellaneous
Remember! Only intercompany transactions get posted to 65 income and 95 expense accounts

8. The Key to Intercompany Transactions
If you post revenue to an intercompany revenue account, you or somebody else in CAP must post an equal 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

9. Intercompany Transaction Posting
The fool proof method of ensuring intercompany transactions remain balanced is to create intercompany invoices (income) and intercompany bills (expense) at the same time with the same date for the same amount. This assumes you are posting both sides of the transaction within your wing.
Income
Expense

10. Intercompany Example
TX Wing pays TX-455 $100 per month to clean Wing HQ
An invoice for $100 is prepared with TX Wing as the customer and is dated the last day of the month
The invoice item posts to account , From Wings Miscellaneous
The invoice class is TX-455 to capture the revenue in the TX-455 Budget to Actual Report
A bill for $100 is prepared with TX-455 as the vendor and is dated the last day of the month

11. Intercompany Example
The bill posts to account , Expenditures With Units Below - Miscellaneous
The bill class is TX-001 since this is an expense for TX Wing
Intercompany revenue (65 account) and intercompany expense (95 account) are equal on the same date
Bill payment and invoice receipt of payment will not affect the revenue and expense date

12. Common Intercompany Posting Errors
Posting intercompany revenue and expense in non-intercompany accounts
Example – A squadron pays for its members to attend the wing conference. This often gets posted to Wing Conference Registration in error. Since this is a squadron paying wing (CAP to CAP) it is intercompany revenue and must be posted to From Units Below – Wing Conference. The squadron expense gets posted to Expense With Wings – Wing Conferences
The above example is also true if another wing is paying for one of its members to attend your wing conference. Your wing records intercompany revenue in account From Wings – Activities. The paying wing records intercompany expense in account Expense With Wings – Wing Conferences
The class should be Wing Conference for the revenue and the expense

13. Common Intercompany Posting Errors
Posting non-intercompany revenue and expense in intercompany accounts
Example – Squadron member John Smith is being reimbursed for purchasing squadron supplies. Since John is a CAP member this reimbursement often gets posted in error to an intercompany expense account beginning with 95.
This is not intercompany expense because the funds paid to John are leaving CAP.
The correct account is Supplies
Amounts posted to 65 intercompany revenue accounts and 95 intercompany expense accounts do not increase or decrease CAP cash because they offset each other. It is like taking money from your right pocket and putting it in your left pocket

14. Common Intercompany Posting Errors
Intercompany invoices become intercompany accounts receivable (A/R) until payment is received. Intercompany bills become intercompany accounts payable (A/P) until payment is made
On 30 September it is extremely important that intercompany A/R and intercompany A/P equal each other
Wings sometimes pay an intercompany bill with a squadron in late September. This satisfies the A/P and it does not show on the 30 September A/P Aging Detail Report
However, the squadron does not deposit the payment until sometime in October. This causes the A/R to remain open on the 30 September A/R Aging Detail Report until the receive payment is recorded
Wings should not pay intercompany bills in late September if the intercompany payment won’t be posted until October

15. QuickBooks Intercompany Report
The next slide shows a report that can tell you at a glance if intercompany is in balance. If all the intercompany transactions are within your wing, the net income will be zero. If there are transactions with CAP components outside of your wing, those amounts will show as positive or negative net income because you are only posting one side of the transaction. This report is very helpful and should be reviewed frequently. Small intercompany variances are much easier to address than incorrect postings over a lengthy period of time. Your WFA can create this report for you.

16. QuickBooks Intercompany Report

17. Helpful Review
The document and diagram below will provide you with a helpful review of intercompany transaction posting