> For the complete documentation index, see [llms.txt](https://smartbooks.gitbook.io/smartbooks-docs/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://smartbooks.gitbook.io/smartbooks-docs/consolidation/intercompany-setup/specification-of-intercompany-accounts-profit-and-loss.md).

# Specification of Intercompany Accounts - Profit and Loss

You can assign intercompany accounts at the subfolder level in the consolidated financial accounts. This requires placing intercompany accounts into dedicated subfolders. To adjust their behavior, click on the subfolder options, note that the available settings vary between Profit and Loss and Balance Sheet reports.

**Profit and Loss Intercompanies**\
Within a Profit and Loss report, you can configure subfolder intercompany settings using the following options:

* **Not Set:**\
  No specific intercompany behavior is applied. Choose this option if no intercompany adjustments are required for that subfolder.
* **Result Subsidiaries:**\
  Use this setting when you want the intercompany results from subsidiaries to be directly included in the Profit and Loss statement without further adjustment. In this mode, discrepancies between intercompany transactions are not actively balanced.
* **Intercompany Transactions:**\
  When you select this setting, Smartbooks employs the **IC Difference Profit and Loss** account to ensure that all intercompany transactions balance to zero.
  * If the transactions balance, the IC Difference Profit and Loss account displays a value of 0.
  * If there is a discrepancy, the account shows the variance, which is then used to adjust the consolidated Profit and Loss statement for accurate reporting.

**Be Cautious:**\
If a folder intended for Result Subsidiaries is mistakenly set to Intercompany Transactions, those results will be included in the IC Difference Profit and Loss calculation even if they shouldn’t be. To prevent skewed consolidation results, always choose the appropriate setting for each subfolder.