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arkvalleyinfo
October 16, 2018
Solved

What is the correct why to set up Intercompany accounts between separate Companies, are they asset accounts?

  • October 16, 2018
  • 2 replies
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Need inter company accounts between separate companies

Need directions to set up correctly

Not sure if the account would be an Asset Account

Know that each one would balance to the total in the separate inter company account

    Best answer by

    The inter-co balances may be debit or credits depending on who owes.  If you know in advance that one co will always be borrowing and another will be lending, then set them us as liabilities & assets respectively.  But if you don't know, or if the balances float back and forth, then just define them the same in both companies and allow the balances to become negative when needed.  Personally I class the inter-co advances as a long term liab even if its not really intended to be a long position, but that gets it out of the 'operating' area of the balanace sheet and puts it into financing - which is probably what it is?

    2 replies

    A
    Anonymous
    Answer
    October 16, 2018

    The inter-co balances may be debit or credits depending on who owes.  If you know in advance that one co will always be borrowing and another will be lending, then set them us as liabilities & assets respectively.  But if you don't know, or if the balances float back and forth, then just define them the same in both companies and allow the balances to become negative when needed.  Personally I class the inter-co advances as a long term liab even if its not really intended to be a long position, but that gets it out of the 'operating' area of the balanace sheet and puts it into financing - which is probably what it is?

      V
      Victor 2021
      July 14, 2021

      The recording of inter company transactions largely depends on whether the reporting entity is part of the group or not (in terms of group accounts)

      If its part of the group,then in set up, whats critical is to ensure in one entity the transaction sits as an asset while in the other entity it sits as a liability. This is easy because the two accounts always have  contra entry transactions and thus the net effect in the books is zero.

      This situation is different when the reporting entity is not part of the group. It this case,its important to predetermine if by nature of transactions ,whether the net effect is a liability or an asset position to the reporting entity. If the net effect is a liability ,then set it up as a liability and vice versa.

      Inputs by CPA VICTOR MUTUKU-KENYA

        T
        TopherL
        May 23, 2022

        Any suggestions on how to setup intercompany payroll? Company A is on Quickbooks and newly acquired Company B is on a different accounting system.

        Thank you,

        -Chris

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