USA Accounting for distributions made from one pass-thru entity to another pass-thru entity


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For simplicity: There are two separate US partnerships where Company A is 25% owned by Company B. Company A distributed $100K to Company B in January 2021. How do I account for this on Company B's books? Since Company A and B are both partnerships and pass-thru entities, would the correct treatment be to debit cash and credit loan accounts to the partners? First-time poster, so any guidance on the above as well as posting etiquette is appreciated.

Best,
Jersey
 
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Dear jersey
Since the two entities in question are independent entities from their partners, it would not be suitable to directly credit the partners loan account.
Instead an account of company a should be created in the books of company b under the head loans and advances and thus cash/bank should be debited and company a account should be credited
 
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Hi Shounak,

I already have an asset account on Company B's books, which shows the value of the Company A investment. I suppose then, that I should simply debit cash and credit this asset account when a distribution from Company A occurs, thereby reducing the asset value on Company A's books. I would then credit cash and debit the individual partner's equity account to account for any cash distribution from Company B to the individual partners.

Best,
Jersey
 
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Dear jersey
If the money being received in the current scenario is related to the original creation of that asset account. In that scenario the asset account may be credited. However if it is a separate transaction from the one originally done then maintaining two separate accounts may be an option to provide better clarity
 

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