Intercompany loans

[julie joannie]

my company (a school) opened up a branch,the new school needed a loan from the bank but they wouldn't get the amount required so the main school borrowed on its behalf.the new school pays its instalment to the main school's bank account when its due.this loan will take about 7 years.what are the accounting entries for both the main school and new school when the loan is deposited on the new school's account and when the new school is paying its installment to main school.remember the new school pays both intrest and principal on its loan.

 

[kirby]

".remember the new school pays both intrest and principal on its loan"
New school does not have a loan, main school does. Main school gave cash from loan to new school. So that is either an intercompany payable or if a note was made between them: an intercompany loan. As new school pays, the credit is to cash and the debit depends on if it is an interco payable or an interco loan.