Accounting for receiving and recovering a loan between my two companies
Clau
Member Posts: 2
We own 2 companies: Our company "A" and our company "B", which was recently incorporated. We've been recording most of our purchases of "B" in the books of "A", so in essence "A" has been loaning the money to "B".
Therefore, in "A"’s books any purchases made on behalf of the new company or any monies transferred from "A" into the new company’s bank account should be treated as a Loan Receivable from the new company on "A"’s books.
Then, in the new company’s books, I should record the expense, HST etc and record a Loan Payable to "A".
This is the solution our accountant gave us. The question is: How do I do all this in Wave? What's the best way to do it without disrupting or messing up our bookkeeping.
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All the items that you categorised as Purchases in A that were actually on behalf of B need to be recategorised to Current Assets where you need to have set up an Inter-Company Loan account to nest these into. Obviously if you have been claiming VAT on these items in A then you actually need to revert those claims as they do not belong to A.
Cash transferred to B from A also need to be categorised to the Inter-Company Loan account.
In B you need to set up an Inter-Company Loan account under liabilities. The money it has received into its bank from A needs to be categorised to this loan. For the item paid for directly by A on behalf of B you can either bring these in by journal, crediting the loan B and debited Purchases in B (or whichever expense/asset category is appropriate) OR you can show each item as paid from cash in B and then balance the cash account in B by adding money received in cash categorised as loans from A nesting this under the Inter-Company Loan account.
It is imperative that you always ensure the inter company loan accounts on A & B always show the same value.
Hope this helps
Did the above clarify things for you?