Intercompany Accounts


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Hi All

Could any one please give me some examples of intercompany transactions, suppose if parent compnay is paying for all the capital expenditure, what will be the entries in parent company book and subsidiary company book, and how to reconcile these accounts at the end of month.

Much appreciated if simple examples are given.

Thanks a lot
Imran
 
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kirby

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Parent buys fixed assets (intended to give to Sub A)

Parent Books

Purchase

DR Fixed Assets $X
CR Cash ($X)

Parent sends fixed assets to Sub A, Sub A now owes the cost to Parent

Parent
DR Due From Sub A $X
CR Fixed Assets ($X)

Sub A
DR Fixed Assets $X
CR Due to Parent ($X)

Then at month end you do an intercompany elimination of the Due to Parent and Due From Sub accounts
 
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Inter Company Accounts

Hi Kirby

one more thing want to ask, how do we eliminate the inter-company accounts at the end of month, I am really thankful to you.

Thanks
Imran
 

kirby

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At month end you will create a consolidated financial statement that includes the balance sheet of Parent and Sub A. You combine those reports and your combined result will show a DEBIT balance in "Due from Sub A" and an offsetting CREDIT balance in "Due to Parent" . You make a "worksheet" entry (not an entry to their books, just - for example - a posting to an Excel workbook where you are adding these together) - that CREDITS the "Due from Sub A" line and DEBITS the "Due to Parent" line - thus ELIMINATING those amounts from your final report.

So if you did this in Excel, Col A has the account descriptions, ("Cash", "fixed assets"), Col B has the Parent amounts, Col C has the Sub A amounts, Col D is is the sum of the Parent and the Sub A rows, Col D will hold the ELIMINATING amounts, and Col E has the final ("consolidated" ) amounts.
 
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thanks a lot Kirby, you have made it easier for me to appear in an interview now.
 
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kirby

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Great! Good luck with the interview!
 

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