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fincoord
Level 2

debt between 2 companies

Company A is paying expenses for start up of Company B.  As items are being purchased or bills being paid, Company A is making an entry to Receivable from Company B.  It could possibly be longer than a year before Company B has made enough money to reimburse Company A -- what entries should Company B be making now to record the Payables to Company A?

1 Comment 1
john-pero
Community Champion

debt between 2 companies

Scenario 1 both A and B owned by same person. B enters bills, pays bill from a clearing account, deposits "money" paid on its behalf into the clearing account from owner equity contribution. In A the money out for B is owner draw.

 

If there is no relation between the companies or tge ownership is different, do as above with clearing account but depksit to zero it from a new liability account. I would use Current Liabikity instead of long term simply because the loan amount is always fluid with no strict repayment terms and due date.  In A the loaned money is an Other Current Asset.

 

The IRS may, if you were audited, require the imposition of imputed interest on the loan. 

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