Intercompany Transactions

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Vineetha Nair

• May 25, 2021 12:13

Hello everyone,

I would like to know what is the best practice followed for accounting the below situation...

If the AP is getting booked in one entity and the payment for this is done from another entity, how can we account for the payment in the simplest way which will  have an impact on the Interco balances. Would appreciate a feedback.

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  Rebecca Ralls

  • May 25, 2021 20:40

  Hi Vineetha,

  If you are using ledgers and are booking a Payable in one company(ledger A) and paying it from a different company (ledger B), you would need to record a credit memo in ledger A and select a due to/due from liability account as the expense GL account.  And then to record the payment inLedger B, you can book a Cash disbursement or a Jornal entry to credit cash and debit the Due to/Due from GL Account. 

  Even if you are a GLAV instead of a ledger to keep your companies straight, this is still the process I would recommend.  

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  Vineetha Nair

  • May 26, 2021 04:38

  Hi Rebecca,

  Thank you so much for your prompt response. We can certainly try doing this way which will at least reduce 2 journal entries from the current method we are using .

  I didn't understand what's GLAV....sorry I am new to AS, just in the learning phase.

   

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  Rebecca Ralls

  • May 27, 2021 15:29

  Sorry! 🙂
  GLAV = GL Accounting Variable

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