USA Intercompany transaction


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I started working for a company that has quite a bit of intercompany transactions. I notice that two of the entities has the intercompany loans recorded on their trial balance as an asset on their balance sheet instead of a liability. What is the correct way to make the entry, so the subsidiary records their loan to corporate.
 
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kirby

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Sounds like you have a lot of clean-up ahead of you!
No simple answer to this because if the sub has a debit balance in Loan Asset then more accounts are messed up.
That is- if parent made a cash loan to them and they have somehow recorded the debit as Loan Receivable instead of Cash then Cash is misstated too. So 1) get detail of transactions with Sub on parent's books and 2) ask them to send you the G/L detail of their interco transactions with parent. Then you can unravel this.
 
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Inter company balance is something that looks easy and simple but this can be most complex at times. Considering your situation of Loan Payable recorded as loan receivable, you may want to first check the Bank Reconciliation report, if the loan was given in cash and make sure that when loan was taken by the company the bank/cash was debited as a deposit. And check that transaction what account was credited when the deposit was made of the loan.

Ideally, while recording that deposit, The Inter Company loan account should have been credited (to create a loan liability in Balance Sheet). You would want to correct that deposit entry of loan and change the credit account. You would only be able to do it if books are still open for that period. Otherwise debit that account and credit the loan account.

Once you clear this loan account transaction, you may want to check with other reconciliations for all inter company balances.

If this is not clear or if you need more help, let me know!

Thanks! Have a good weekend!
 

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