How To Use IFC Codes

What Are IFC Codes?

IFC stands for Interfund Codes.

Interfund Codes are a method to record a transaction when Fund B owes Fund A money. The accounts used are often referred to as Due to/Due From accounts.

This can be used for inter company transaction between Funds, Departments, AMPs, Cost Centers. Any portion of your company that is responsible for recording its share of income and expenses that may be originally paid for by another portion of your company may use these codes.

These codes will even work between Horizon Financial Companies, i.e., WH1 and C001.

Setup IFC

Review Setup an Interfund Code

Accounts Payable

In Accounts Payable, the Paygroup determines which checkbook and cash account to be used when payment of a voucher is completed.
The Fund of the paygroup's cash account can be thought of as the HOME fund for this voucher.
When entering in the Distribution expense lines, any expense account within the HOME fund will not use an IFC code. The Paygroup's Fund and the Expense Fund match.
Any Distribution Expense account that is outside of the HOME fund will need an IFC code.
1. This code tells the system that the HOME fund is due payment for the amount of this line.
2. The HOME fund must be setup in the IFC code used as the Interfund Receivable and the OUTSIDE fund must be the Interfund Payable.
3. The voucher entry system will prevent mismatches between accounts and IFC codes.
When the voucher is posted, two additional entries will be created.
1. A debit to a receivable in the HOME fund
2. A credit to a payable Account in the OUTSIDE fund.

Journal Entries

When using IFC codes in a Journal Entry, care must be taken to keep the transactions in balance.

It may help to think of how IFC codes are used in Accounts Payable.

The first part of the transaction does not use an IFC code. This is the transaction to the HOME fund . One J/E line with no IFC code that is to the HOME fund.

The "distribution" lines to Funds outside of HOME fund will need an IFC Code.

EXAMPLE: We can show how this works with an inventory transfer.
1. Inventory is kept in the Central Office (HOME fund 1000) Warehouse, Account 1000-1260-00-0000. We need to move $500.00 of inventory to Fund 3000.
2. First entry to the HOME fund will be to Credit 1000-1260-00-0000 $500.00. The IFC Code will be BLANK.
3. Second entry to the OUTSIDE fund will be to Debit 3000-1260-00-0000 $500.00. This entry will have an IFC Code that matches the Home Receivable ad the Outside Payable Funds. We can call this IFC Code "3000"
4. IFC Code "3000" will be set up with Interfund Receivable 1000-1129-00-0000 and Interfund Payable 3000-2119-10-0000
5. The edit list will only show the two entries. When an IFC has been entered it will show the GL account followed by / and the IFC code
  1. When posted these two entries will produce four entries in the General Ledger.
  2. The original two entries entered, and two IFC balancing entries.
  3. Each Fund now has a Debit and a Credit to stay in balance. Fund 3000 has a payable and fund 1000 has a receivable.
If the transaction are not in balance, attempting to post the Journal Entry will fail and an error report will show Out Of Balance messages. Correct the error and post.

Journal Entries without an Entry to the HOME fund

Normally one entry will be to your HOME fund . You can however enter a JV with no entries to the HOME fund . In this case all entries would have an IFC code. This would be done in the case of an inventory transfer between two Funds that have no IFC Codes in common. You could use the Central Office "Home' Fund as a middle man.
EXAMPLE
1. $250.00 of inventory in Fund 3000 is transferred to Fund 4000.
2. First entry is Credit 3000-1260-00-000 $250.00. The IFC Code will be "3000"
3. Second entry will be to Debit 4000-1260-00-000 $250.00. The IFC Code will be "4000"
4. IFC Code "3000" will be set up with Interfund Receivable 1000-1129-00-0000 and Interfund Payable 3000-2119-10-0000
5. IFC Code "4000" will be set up with Interfund Receivable 1000-1129-00-0000 and Interfund Payable 4000-2119-10-0000
6. When posted these two entries will produce six entries in the General Ledger.
  1. Fund 1000 receives a debit and a credit. This is just a middle man function, it receives from Fund 4000 and gives it to Fund 3000. Fund 3000 will have two entries
  2. Credit to inventory being removed and a debit (or negative) IFC Payable
  3. Fund 4000 will have two entries
  4. Debit to Inventory received and a credit to IFC Payable
7. Each Fund each have a Debit and a Credit to stay in balance. Fund 4000 pays Central Office, Central office pays Fund 3000.

NOTE: Both transactions must use an IFC code with the same Fund used as the Interfund Receivable. They can be different GL accounts in the same Fund.