USA Help Assign Expense / Income Accounts

[sugey]

Scenario:

Own 2 companies:

Company 1 = sell services
Company 2 = sell products

Company 2 is not doing too good (as we are barely starting) and often we transfer money from company 1 to company 2.

I used to just keep track of expenses on an excel sheet but recently started using QB online.

I don't want the transfers from company 1 to show as "income" for company 2. To what account should I assign them? Equity? And how would that affect company 1.

Any help will be greatly appreciated.

 

[bklynboy]

If the transfer of money is not expected to be repaid then this should be treated as a capital contribution from company 1 to company 2. Typically, for start-ups you woudl have seed capital injected as they need to cover start-up costs so I dont understand why this is not how the funding is being done.

However, assuming you are simply issuing a loan between affiliates, then you should record as a non-interest bearing loan between parties. In no instance is this income to company 2 or an expense to company 1.

 

[Fumita]

I agree with the above, only addition would be to do some testing on your apportionment basis.

It could be skewing the expenses unfairly in favour of company one which could be why company 2 appears to be doing badly. i.e. the marginal vs absorption costing debate...