Intercompany transactions occur when one company within a group transacts with another company within the same group. These transactions need to be recorded to reflect the payables and receivables between the entities. Below are examples of the journal entries for intercompany payables and receivables.
Example Scenario
Assume Company A sells goods worth ₹100,000 to Company B.
Journal Entries in the Books of Company A (Seller)
To record the sale to Company B:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-06-30 | Intercompany Receivables A/c | 100,000 | |
| | To Sales A/c | | 100,000 |
| | (Being goods sold to Company B) | | |
| | |
|
To record the payment received from Company B:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-07-10 | Cash/Bank A/c | 100,000 | |
| | To Intercompany Receivables A/c | | 100,000 |
| | (Being payment received from Company B) | | |
| | |
|
Journal Entries in the Books of Company B (Buyer)
To record the purchase from Company A:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-06-30 | Purchases A/c | 100,000 | |
| | To Intercompany Payables A/c | | 100,000 |
| | (Being goods purchased from Company A) | | |
| | |
|
To record the payment made to Company A:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|
| 2024-07-10 | Intercompany Payables A/c | 100,000 | |
| | To Cash/Bank A/c | | 100,000 |
| | (Being payment made to Company A) | | |
| | |
|
Summary
In the Books of Company A (Seller):
- Record the sale:
- Debit Intercompany Receivables A/c
- Credit Sales A/c
- Record the payment received:
- Debit Cash/Bank A/c
- Credit Intercompany Receivables A/c
In the Books of Company B (Buyer):
- Record the purchase:
- Debit Purchases A/c
- Credit Intercompany Payables A/c
- Record the payment made:
- Debit Intercompany Payables A/c
- Credit Cash/Bank A/c
These journal entries ensure that both companies accurately reflect the intercompany transaction in their financial records, maintaining proper accounting and reconciliation within the group.
