Hi all, in intercompany journals two or more subsi...
# accountingm
Merk
02/14/2025, 8:19 PMHi all, in intercompany journals two or more subsidiaries trade with each other and, the month-end elimination creates a journal to eliminate the impact and also posts a reversing journal to the next period. How long this cycle of elimination and reversal would continue? Do subsidiaries transfer money to each other?
k
Kman
02/16/2025, 11:35 AMThey don’t have to exchange money every month. You can just create and a Current asset account called “Due to/ (from) Subsidiary X” and just debit /credit it. (There will need to be a similar account for each subsidiary involved in the inter company exchange)
m
Merk
02/16/2025, 5:19 PMThanks. So I need to create a journal to debit or credit the account. What account would be the other side of the journal? And what currency do you create the journal?
I take at the end of the year you end up with a balance in those accounts for each subsidiary, then you can do a manual netting and make payments to the subsidiaries, is that correct?
k
Kman
02/17/2025, 3:18 AMMerk - I am not an accounting expert, I would vaildate the below with someone who can review and confirm what i am saying is right.
Parent Company has 2 subsidiaries - Company 1 & 2.
Below is an example of an “Expense” Company 1 incurred, and needs to be cross charged to Company 2. The JE looks like this.
Kman
02/17/2025, 3:23 AMI have never done this in different currencies. So not sure - mine is all in the same currency. (I can see you doing it in default currency for each company when you do the JE and then if there is any currency impact, that will need to be handled separately)
At YE (or any time of the year) - the balances in the Due (to)/ from accounts for each company will be accurate, and you can move funds over and zero out the balances, or keep it as current liability on the balance sheets of both companies.
I hope this makes sense - but again, please have someone validate the above.
m
Merk
02/18/2025, 8:32 PMThanks @Kman I think it depends on how the company treats their intercompany transactions too. Thanks for the help 👍
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