This option reverses only the lower side, the set with the smaller balance, and reclassifies it to the target account on ‌the higher side. The higher side, the set with the larger balance, retains its original account(s). 

This option uses a dedicated setting called Net Details in the Account Netting field in the Settings form. 

Net Details example:

In the example, the parent entity consists of three leaf members: Entity A, Entity B, and the Elim Entity. Entity A and Entity B carry accounts receivable and accounts payable that must be netted.

  • Entity A has AR1 1110 with a balance of 70 and AR2 1600 with a balance of 40, leading to total receivables of 110. 
  • Entity A also holds a payable account, AP1 2050, with a balance of 35. Entity B holds AP1 2050 with a balance of 80. 

At the parent level, receivables total 110 and payables total 115. Overall, ‌payables should carry a net balance of 5. The netting will start with standalone Entity A and Entity B, and then continues at the parent level.

The Account Netting process: 

  • Netting at Entity A. Entity A posts −35 to AP1 2050 and −35 to AR target 1120.
  • Netting at Entity B. The payable side keeps its original account. AP1 2050 needs no netting adjustment.
  • Netting at parent level using Elim Entity. Accounts Receivable (AR) aggregates to 75 from Entity A, and Accounts Payable (AP) aggregates to 80 from Entity B. Overall, AP is higher. The system reverses the source AR account in the Elim Entity: −70 in AR1 and −40 in AR2. The system also reverses the netting entry from Entity A as +35 in AR Target and +35 in AP Target. The system retains the original AP account in Entity A. Corresponding to the reversal of −70 and −40, the system posts −110 in the AP target account. The system reverses the source AR of 75 (−70 − 40 + 35) and the source AP of 75 (+35 − 110). Only 5 remains on the AP side.

Apply system settings

To apply system settings: 

  1. Select the Maintain module and choose Settings from the Administration Card.
  2. Next to Account Netting, select the value text box and type Net Details, or leave it blank.  If you leave the Account Netting blank, the system uses the Account Netting feature, which uses a single account in the source.
  3. Select the Save icon in the upper toolbar, then close the Settings form.