UK Inter Company - Accounting Treatment

[PM0511]

Hi there

There are two companies, let's call them Company A and Company B for simplification. The owner is the same for both and we are using only one intercompany for each company, so both debits and credits create net position.

Company A - the owner uses a credit card which includes an element attributable to Company B.

The statement arrives in to Company A, and the entry for Company B's element is:

Dr intercompany
Cr credit card company supplier account

Company B settles the balance in the following month so the entry in Company A is:

Dr bank
Cr intercompany

The end balance is nil.

Turning to Company B. The bank payment settling the balance to Company A is straightforward, this is picked up from the statement and the entry is :

Dr - intercompany
Cr - bank

My question is - what is the entry for Company B to create the Cr entry to balance the intercompany account.

Thanks in advance.

 

[bklynboy]

You are missing an entry on Company B to record the expense for the CC item. Which is Dr Expense (whatever they bought) credit Interco. Then you have the settlement right as Dr Interco Cr Cash and Interco Is Nil