Which statement is true about inter-company journal entries?

The fundamental principle of inter-company accounting in systems like Oracle General Ledger is that journal entries must balance within each legal entity (subsidiary). When a single journal entry affects multiple legal entities, the system automatically generates intercompany receivable and payable lines. These system-generated lines ensure that for each distinct legal entity (represented by a primary balancing segment value), the total debits equal the total credits. This maintains the integrity of each subsidiary's individual general ledger and ensures each entity's trial balance remains in balance.

A. Minimum of four lines: While a simple two-company transaction often results in four lines (one operational debit, one operational credit, and two system-generated intercompany lines), this is not a strict rule. More complex journals can be structured differently.

B. used to log intercompany eliminations: Inter-company journals are used to record transactions between related entities. Eliminations are a separate, subsequent process performed during financial consolidation to remove the effect of these transactions from the parent company's consolidated reports.

D. maximum of six lines: There is no predefined maximum of six lines for a journal entry. Inter-company journals can contain numerous lines, limited only by system constraints, to reflect the complexity of the underlying business transaction.

1. Oracle Fusion Cloud Financials Documentation. Implementing General Ledger

Release 13

Part Number F58268-01. Chapter 6: Define Intercompany Balancing and Clearing Options

Page 103. The documentation states

"The General Ledger automatically creates the balancing lines for each legal entity." This confirms that the journal must balance at the subsidiary level.

2. Oracle E-Business Suite Documentation. Oracle General Ledger User Guide

Release 12.2

Part No. E48722-06. Chapter 4: Journal Entry

Section: "Intercompany Journals

" Page 4-10. The guide specifies

"When you post a journal entry that affects more than one company

the General Ledger automatically creates balancing lines to ensure that your journal entry balances by company." This directly supports the principle of balancing within each subsidiary.