Intercompany Accounts

Many business owners, especially those owning franchise locations, have more than one business or franchise location. Oftentimes, it is necessary for a business owner to move money from one location to another. Typical reasons for this activity include covering payroll obligations, large expenses, and other standard business needs.

So how does this play out in the books?

Let’s assume that Location A gives Location B $10,000 to cover payroll:

Location Books Account Debit Credit Explanation
Location A Due from Location B $10,000   Amount owed from Location B
Location A Operating Account   $10,000 Cash outflow to Location B
Location B Operating Account $10,000   Cash inflow from Location A
Location B Due to Location A   $10,000 Amount owed to Location A

What’s the end result? Location B has $10,000 more in their operating account and Location A has $10,000 less. Additionally, the journal entry has ensured we have properly tracked the fact that Location B owes Location A $10,000. This “loan” will sit on the books of both locations until it is repaid. These “Due To and Due From” accounts must balance for the books to have been prepared properly.

More Questions? Email Ceterus Support

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