Recording Intercompany Transactions

To track the balance of transfers between two companies, including cash payments, purchases, and sales, you must set up a liability named “Due to/from (company name)” in each company’s books.

For example:

John Doe is the principal shareholder for two different companies: ABC Farms Ltd. And XYZ Acres Ltd.

1) XYZ Acres Ltd. pays to have a tractor repaired for ABC Farms Ltd.  For XYZ Acres Ltd., the transaction will look like this:

2) For the same transaction, ABC Farms Ltd. must also book a transaction.  It will look like this:

3) ABC Farms Ltd. Transfers $1,000.00 to XYZ Acres Ltd. To pay for the tractor repairs.  The transaction is recorded in ABC Farms Ltd.’s books as:

4) XYZ Acres Ltd. will need to record that they received the funds.  The transaction will look like this:

Last updated on December 19, 2019 by FCC AgExpert