USA One owner three entities; recording intercompany transactions

[SisW]

Using QuickBooks Desktop Premier 2022. I created Intercompany Transaction accounts for all three companies and used sub-accounts under for each company, A, B, C.
Here's what happened. Company A transferred the largest part of their bank account to Company B: $2000.00 (example)
(Company A will dr 2000.00 Intercompany sub-acct B and cr (2000.00) bank cash.
(Company B will dr 2000.00 bank cash and cr (2000.00) Intercompany sub-acct A)
Now all the money is in Company B
Monthly, the expenses for Company B are paid by Company C and also accounted for in Company C's GL expense accounts. (dr expenses and cr cash)
Company C then informs Company B of the total amount of checks written.
Company B then transfers the exact amount for the written checks to Company C's bank. (dr Intercompany sub-acct C and cr Company B bank cash)
Company C receives the funds and dr cash bank and cr Intercompany sub-acct B
I know some have suggested setting up an Intercompany A/R and A/P, but as per the CPA, I set the chart of accounts Intercompany Transactions under the type: bank.

I want to reconcile the account monthly, yet, since I've worked more with Intercompany Payroll accounts, which are easy to zero out, I have completely forgotten how to zero out these type of accounts. I would appreciate any suggestions. Thank you so much.

 

[kirby]

Question
Do you want Co B's expenses to be recorded in Co C?

Also,
based on how you described things, Co B never has expense and Co C gets reimbursed by B for B'S expenses but does not then reduce the Co B expenses on C's books. Why?

 

[SisW]

Co A is the holding company, Co B is the operating company for all the subsidiaries, which is presently only Co C. More subsidiaries will be added as the plants are built, but all operations will flow through Co B. That's the way the owner wants it setup.

 

[SisW]

Question
Do you want Co B's expenses to be recorded in Co C?

Also,
based on how you described things, Co B never has expense and Co C gets reimbursed by B for B'S expenses but does not then reduce the Co B expenses on C's books. Why?

Co A is the holding company, Co B is the operating company for all the subsidiaries, which is presently only Co C. More subsidiaries will be added as the plants are built, but all operations will flow through Co B. That's the way the owner wants it setup.

 

[kirby]

Entry 1 and 2. Co A sends $2,000 to Co B. B receives it.
Entry 3, 4, 5 Co C pays $1,500 for Co B and records expense. Co C also records interco revenue from B offset by a receivable from B. B records interco expense offset by payable to Co C.
Entry 6 and 7. Co B pays C. Co C receives payment.
Entry 9 interco items eliminated
Final 10 - Consolidated Co has paid $1,500 and recorded the expense, which is correct.

Notes
The interco accts are not usually in Cash category. S/B in own line items.
In this example, Co C has an agreement with Co B that C will charge a mgmt fee equal to expenses B pays for C. You might add a profit margin - but that is up to you. Consider using an atty to create the inter co agreement.
Some jurisdictions may charge a sales tax on the interco "sales" - check with your tax advisor.