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Intercompany transactions: why use them, what are types?

Why would a company engage in intercompany transactions? What are some types of intercompany transactions?

What is the difference between upstream and downstream intercompany transactions? Why is it important to know the difference?

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Why would a company engage in intercompany transactions? What are some types of intercompany transactions?

The definition of an inter-company transaction is one in which you buy or sell between a company which is owned by your total organization.

Example 1: your company manufactures and sells shoes. You have a sister company which makes boxes. You buy your boxes from your sister company, and of course, better to buy there than from a totally unrelated company. You help your sister company with its income statement ...

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In 343 words, the solution explains the questions together with examples.

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