Intercompany Loans

by Veneer
(Canada)

See Comment Section For<br>How to Record a Vehicle Loan from a Sister Company

See Comment Section For
How to Record a Vehicle Loan from a Sister Company

How do I report transfers?

I transfer funds from a profitable business to another one that is not doing well to cover the expenses.

I don't know how to show the income, then the transfer so I don't pay income tax on the amount again.



section divider



Hi Veneer,

Intercompany transfers/loans are an advanced bookkeeping topic which could have tax consequences. I will not cover that.

Strictly from a "recording the entries" perspective, you want to set up Due To / From Accounts for each company. All transactions need to run through these accounts.

At year-end, you need to reconcile the two accounts as they should have the same balance. One company will show a receivable (or possibly an investment), the other company a payable ( or possibly a liability).

My advice is for you to speak with your accountant to avoid negative tax consequences.




P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

Comments for Intercompany Loans

Click here to add your own comments

Oct 08, 2011
 Intercompany Loans
by: Anonymous

Is a company loan to another company considered an expense for income tax purposes until it is paid back.



section divider



I moved your question. Please read the above post.
Nov 25, 2011
 Vehicle Loan from Sister Company
by: Jessica, Ottawa

Hi there,

I'm really stuck... I need to enter a vehicle purchase into QuickBooks.

I am doing the book keeping for two sister companies - we'll say Company A and Company B.

Company A purchased a vehicle in full and sold it to Company B. Company B will pay Company A back over 5 years at 3.9% interest.

What are the entries for Company B???

Help!



section divider



Hi Jessica,

I assume that Company A purchased the vehicle because Company B didn't qualify for the loan.

You need to set up intercompany accounts for the two companies ... if they don't exist already. All the transactions will run through the intercompany account.

The bookkeeping entries for an intercompany transaction are generally:

Transfer of asset from Company A to Company B:

DR Loan Payable
CR Due to/from Company B

Transfer of funds from Company B to Company A:

DR Due to/from Company A
CR Cash in Bank


It is preferable when dealing with intercompany transactions, that actual cash transactions take place instead of just journal entries. So don't just journal a loan payment to Company A; physically transfer cash to Company A's bank account too.

Also make sure there is an actual written agreement between the companies.

Everything else is just normal bookkeeping. Click here on how to record the purchase of a vehicle purchased with loan financing.
Nov 25, 2011
 GST/HST and Intercompany Loans
by: Lake

Jessica,

I forgot to remind you that you have to pay any GST/HST owing between the companies unless the paperwork for the election (under section 156 of the Excise Tax Act) to treat them as exempt supplies has been completed.

This election is available if certain conditions pertaining to activities, ownership and residency are met.
Oct 22, 2015
 Loan from bank
by: Anonymous

1 - How do I record a loan taken from personal bank of the owner and paid by business bank account, every month
Nov 02, 2015
 Loan from Bank
by: Lake

To answer this, I bopped over to my bookkeeping entries index listing found under "The Quick References " on the navigation bar.

Take a peek under Banking for lots of different entries.

The personal loan would be recorded as a Shareholder's loan if all the proceeds were deposited (lent to) the corporation.

If you are saying that the owner has a personal loan and the business is making the loan payments (i.e. the loan was not business related), then all loan payments on the personal loan would be considered a Shareholder's Withdrawal.

If the company is not incorporated, then they are owner contributions and owner draws not shareholder loans / withdrawals.

Click here to add your own comments

Return to Leases.
Share this page:
Enjoy this page? Please pay it forward. Here's how...

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.

Enjoy A Tea Break With
Me Today. Let's Chat!

Use the search feature to quickly find the
information you're looking for.



SHORTEN
Your Learning Curve!

 
How to do MonthEnd | Month-End ProceduresLearn what to do after you have entered your data. Click on the image to learn more.



Warm up your tea cup and check out these chats ...

Click on image above to read the chat.








Join Me On Facebook

Help support this site by "liking" me! Here's where I post current information.

Listed Under Websites NOT Local Business.
This website is NOT associated with the business operating in Bonnyville AB.


A Handy Reference

 
Bookkeeping checklists that are a handy reference.Bookkeeping checklists that are a handy reference. Click on the image to learn more.