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Highlighted
Level 1

Intercompany transactions that will never be paid

I am accounting for several companies that are independent but have the same owner.  We transfer  cash between these entities to cover expenses in the cash poor companies.  These intercompany payables/receivables will not be paid back or settled.  Therefore the intercompany a/r or payable just keeps increasing.  What is a better way to account for these transfers since they are not true a/rs or payables?

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Highlighted
Level 3

Intercompany transactions that will never be paid

If the businesses are run as sole proprietorships, then it's easy to do.  Money going out of a profitable company is recorded as a draw to the owner.  Deposited into the cash poor company as a contribution of equity from the owner.

 

If the companies are incorporated, then there are problems.  I would suggest talking to a CPA about what to do.

 

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