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tombutler9536
March 3, 2025
Question

Making Journal Entries to Transfer Expenses from One Company to Another

  • March 3, 2025
  • 2 replies
  • 0 views

I’ve seen a couple of variants of this question in the support forums here, with several conflicting opinions for how to go about this, and several needing to re-explain the core issue at hand. I suspect Journal Entries are the way to go without overcomplicating it, but here’s the scenario and background info---

 

Background: Company A has existed for about a year now, and uses a separate bookkeeping software to track income and expenses (not QBO). Company B is newly formed, and is now the parent company (Company A is now a subsidiary). Both companies are single member LLC’s with the same owner, and QBO is the bookkeeping solution for Company B (we’ll be keeping the other software for Company A). Business bank accounts are and will continue to be separate, and there are no planned “intercompany” transactions going forward through the normal course of business (blending of income streams, or one company paying the other company’s expenses).

 

Scenario: One of the particular services we’ve been offering under Company A, we now want to start offering exclusively under Company B. To that end, any income and expenses related to this service that we’ve recorded from Jan 1 through current (under Company A), we now want to “transfer” these to reflect under Company B. Any new business or expenses incurred will simply be logged directly in QBO going forward for Company B.

 

So for this small window of time (Jan and Feb 2025), what is the best approach to recording these transactions (select income and expenses from Company A) in QBO for reporting purposes under Company B? 

2 replies

EduardA
EduardA
March 3, 2025

Thank you for providing detailed context about your intercompany transfer situation, Tom. Allow me to outline the necessary instructions on how you can accurately reflect the transfer of specific service-related income and expenses in your QuickBooks Online (QBO).

 

To ensure accurate financial reporting and proper journal entries in QBO for both companies, it's advisable to consult your accountant. They can assist you in documenting the transfer of accounts between related entities. If you don't have an accountant, you can find a professional through this page: Find a ProAdvisor.

 

Another way to manage the transfer is to use class tracking (for QBO Plus and QBO Advanced subscriptions ONLY) and tag those expenses or income under Company B. However, if your class tracking is turned off, you'll need to turn this on first. Once done, you can now start tracking your transactions by departments, product lines, or any other meaningful segments in your business.

 

Is there anything specific about class tracking you'd like me to explain further? We're happy to demonstrate how this feature might complement your accountant's recommended approach.

 

Wishing you continued success with both companies. Please don't hesitate to reach out if you need additional support after consulting with your accounting professional.

Rainflurry
Rainflurry
March 3, 2025

@tombutler9536 

 

Are you OK with just the income and expenses being transferred from Co. A to Co. B?  If so, and you know the amounts of income and expense, you can make journal entries (JEs) in both companies.  However, since income and expense aren't equal, you will need to offset the JEs in both companies to your Owner's Capital/Equity account.  Since these are both single-member LLCs, they will offset on your tax return.  Here are the JEs:

 

JE for Co. A:

 DebitCredit
IncomeXXX 
   Expense XXX
   Owner's Capital/Equity (to balance entry) XXX

 

JE for Co. B:

 DebitCredit
ExpenseXXX 
Owner's Capital/Equity (to balance entry)XXX 
   Income XXX
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