Owner Induced Recordkeeping Problem

@MKM4  First, Accounts Receivable and Accounts Payable deal with potential income and potential expenses, respectively.

What you describe sounds like it would be better dealt with by way of assets and liabilities, current or otherwise.

For instance, if Company A paid a water bill of $100.00 for Company B, the following would happen:

Company A would establish an Asset, perhaps titled Loan To Company B, for $100.00, presumably set against a Bank account. The Asset account would increase by $100.00 while the Bank account would decrease by $100.00.

Company B would establish a Liability, perhaps titled Loan From Company A, for $100.00, set against Utility expense or similar. The Liability would increase by $100.00 while the expense would increase by $100.00, ultimately lowering the Net Income Equity account by $100.00.

When Company B pays money back to A, you would make an entry that increases Company A's relevant bank account by the amount of the repayment while lowering the Asset by the same.

Similarly, Company B's liability would decrease by the amount of the repayment, while their relevant bank account would decrease by the same.

There are several ways to do this; I would suggest using a Deposit on Company A's side with the Asset as a source account and an Expense on Company B's side with the Liability as the assigned account. You could probably jury-rig a way to include Accounts Payable instead of a simple Liability account, but I don't see any reason to do so.

Thank you FFA for the timely response. You are completely correct about setting up an Asset account within Company A and a Liability account within Company B and that is indeed what I did (using QB help & community recommendations). I completely misstated how the two business COA's had been set up. My apologies for that.

Your statement: "When Company B pays money back to A, you would make an entry that increases Company A's relevant bank account by the amount of the repayment while lowering the Asset by the same" summarizes the crux of the problem very well. That being: no cash funds are being brought into Company A, therefore a bank account cannot be increased while lowering the Asset balance.

So as an alternative, I have been considering crediting the asset account and debiting either the owner contribution, distribution account or the retained earnings account since the owner kept the funds without depositing them back into Company A.. Is that an acceptable approach to take?

In others words, since the owner contribution (funds deposited and the asset balance lowered) and the owner distribution (what would have happened had the owner deposited the funds) didn't take place, as an alternative can an equity account be debited in lieu of making a deposit to a bank account while crediting the asset account?

Thank you FFA for the timely response. You are completely correct about setting up an Asset account within Company A and a Liability account within Company B and that is indeed what I did (using QB help & community 

So as an alternative, I have been considering crediting the asset account and debiting either the owner contribution, distribution account or the retained earnings account since the owner kept the funds without depositing them back into Company A.. Is that an acceptable approach to take?

In others words, since the owner contribution (funds deposited and the asset balance lowered) and the owner distribution (what would have happened had the owner deposited the funds) didn't take place, as an alternative can an equity account be debited in lieu of making a deposit to a bank account while crediting the asset account?