When a customer orders products that are sold by different entities, the general ledger (GL) entries for the order processes the transaction using the appropriate accounts. Consider the following sample transaction, based on the multi-entity organizational structure created throughout this topic.

Customer Places an Order

A customer places an order for a book and also purchases a collection of music CDs. The book product's GL accounts correspond to the Associated Parent organization and the music collection product's GL accounts correspond to the Associated Child organization. Assume the book costs $20 and the music collection costs $100. Also assume that neither product requires inventory or Cost of Goods Sold (COGS) calculations and that there is no sales tax charged on the order.

Order is Shipped

The following GL entries are created once this order is marked as shipped.

The GL entries demonstrate that the correct accounts are used for the products sold by each entity. The Accounts Receivable (A/R) and Sales entries are correctly separated and flow into the appropriate organization's GL accounts.

Customer Submits Payment

When a customer submits a payment, the system normally debits the asset account associated with the payment type and credits the accounts receivable account. The following example assumes a customer has made a $20 cash payment on an order containing products from a single entity.

The situation become more complex when processing a payment for an order that contains products offered by multiple entities. While the customer still makes a single payment that is deposited in a cash or bank account, the funds need to be distributed among the various entities.

Assume that the customer who placed the order in the sample transaction submits a payment in the form of a check. The inflow account defined for the Prepaid Check payment type references a cash account that is owned by Associated Parent. The following GL Entries are generated when the payment is saved.

The GL Entries recognize the fact that the Associated Parent's cash account received payment for the entire order. Of this payment, only $20 of the order was for products offered by the Associated Parent organization. The payment also included $100 for the product offered by the Associated Child organization. As a result, the Associated Parent entity owes the Associated Child $100. The Due To/Due From set of entries recognizes this transaction. When the payment is batched to the general ledger, the balance sheets for both organizations show the receivable and payable amounts owed to and expected from the other entity.