My boss has two companies: Company A and Company B. Company B takes a loan from company A in the amount of 100,000. After some time, company B returns 150,000.
What will be the accounting entry and what is the procedure of this extra amount 50,000?
What are the journal entries for an inter-company loan?
Answers
As I understand it, Company A loaned Company B, a possibly related company, $100,000.
Company B returned to Company A, $150,000.
Inter-company loans require the charging of Interest (and recording of Interest receivable) by each party. See this IRS link about the rates, and talk with your tax/accounting advisor for application.
So, let’s say for arguments sake interest is $1,000. The transactions will be:
Company B:
Intercompany 149,000
Interest Expense 1,000
Cash 150,000
Balance sheet would show Company B has a receivable from Company A for $49,000.
Company A records this as:
Cash 150,000
InterCompany 149,000
Interest Income 1,000
Balance sheet would show Company A has a payable for Company B for $49,000.
Filed Under:
Accounting