What is the correct why to set up Intercompany accounts between separate Companies, are they asset accounts?

The inter-co balances may be debit or credits depending on who owes.  If you know in advance that one co will always be borrowing and another will be lending, then set them us as liabilities & assets respectively.  But if you don't know, or if the balances float back and forth, then just define them the same in both companies and allow the balances to become negative when needed.  Personally I class the inter-co advances as a long term liab even if its not really intended to be a long position, but that gets it out of the 'operating' area of the balanace sheet and puts it into financing - which is probably what it is?