Transactions > Transactions - Examples > Recording Intercompany Transfers
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