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tina5
October 16, 2018
Solved

Paying an invoice out of one company that is for a different company owned by the same owner, What entry is needed?

  • October 16, 2018
  • 5 replies
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I manage 5 LLC's and this happens often.  I am paying a bill out of Company A but the bill is for Company B.  This money will eventually be paid back.  Do I need to record a journal entry in both companies?  One showing a loan to and one loan from?  I don't know what other account to use to balance the journal entry.

Best answer by qbteachmt

Honestly, there is so much data going so many different directions, using too many tasks. Let's review:

When you pay something on behalf of someone else, that is Your Asset - loaned to them.

They enter the expense and that they now Owe you = their liability. They can simply Write a check to you and list what they are paying you for, such as supplies or web hosting.

All of this inter-company stuff should really go away. Having a common owner doesn't mean Commingling is a good idea. The IRS and CPAs all will give you guidance on how this is affecting both entities under "Common control." A Lawyer would also give you great guidance on the follies of this mess.

There is no posting to AP manually. Nothing here is Unpaid.

5 replies

qbteachmt
qbteachmtAnswer
October 16, 2018

Honestly, there is so much data going so many different directions, using too many tasks. Let's review:

When you pay something on behalf of someone else, that is Your Asset - loaned to them.

They enter the expense and that they now Owe you = their liability. They can simply Write a check to you and list what they are paying you for, such as supplies or web hosting.

All of this inter-company stuff should really go away. Having a common owner doesn't mean Commingling is a good idea. The IRS and CPAs all will give you guidance on how this is affecting both entities under "Common control." A Lawyer would also give you great guidance on the follies of this mess.

There is no posting to AP manually. Nothing here is Unpaid.

M
Malcolm Ziman
October 16, 2018
It is common practice for associated companies to optimize their combined cash resources. Nothing wrong with that. The accountant needs to adapt to the business, not the other way around.
    A
    arkvalleyinfo
    October 16, 2018

    I wouldn't do a Journal Entry.

    Set up "Other Liability Account" (Loan to Company B). Then write a check to the vendor from Company A using the (Loan to Company B) Account..

    Next write a check to Company A from Company B, under the expense tab enter "Accounts Payable", under customer:job in the check enter in the Vendor. This creates a credit on the vendor's  account.

    Go to pay bills, click on the vendor's bill and click on apply credits.

    Deposit the check in record deposits from Compay B into Company A. use (Loan to Company B) account.

    This should do it.



      T
      tina5Author
      October 16, 2018
      That makes sense except the version of Quickbooks Company B uses is an abbreviated version that has limited fields on the write check screen- I can make the check payable to Company A and use Accounts Payable as the account but there isn't anywhere to enter a customer job.
      qbteachmt
      qbteachmt
      October 16, 2018

      It isn't AP; it is a different type of Liability. It is Debt between the companies, not between a company and a supplier.

      "Set up "Other Liability Account" (Loan to Company B)."

      Other Asset = you paid for someone else's costs.

      "Then write a check to the vendor from Company A using the (Loan to Company B) Account.."

      Yes.

      "Next write a check to Company A from Company B,"

      Company A already paid the supplier. Now, Company B needs to repay Company A:

      Company B enters a Bill for the expense and also a vendor Credit, posting on the expenses tab to an Other Liability account for "owed To Company A."

      Company B pays down the debt to Company A by paying out against that liability; Company A has a Deposit against the Other Asset loan account.

      You won't use AP between A and B at all.

        T
        tina5Author
        October 16, 2018
        I ended up paying the bill out of Company A and using the account Loan to Company B.  Then in Company B I did a journal entry debiting Loan from Company A and Crediting the proper liability account (insurance).  I then wrote a check from Company B to Company A using the account Loan from Company A.  In Company A I deposited it using Loan to Company B account.
        J
        Janice1
        March 26, 2019

        Do I have to close month before journal entry to send money over to other company?

         

        R
        RohitKumar19870123
        December 13, 2022

        Entity A paying vendor bills on behalf of related entities B & C who are not going to be reimburse for the bills. Please advise journal entries and what to do here?

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