[Question] Correct Allocation-Client has two Companies

[litlearth]

Hi, All!
Need a little help in getting the books right before my clients CPA gets the file for taxes.

My client has two companies (company A and company B).
Company A borrow money from company B.

Company A has been paying bills for Company B. How can I show this payback for company B?

In company A's QB file, I have an account in the COA called Loan Company B.
In company B's QB file, I have an account in the COA called Loan Company A, with account type:Other Current Asset (which is not a bank account so it will not show on the screen when you go to "pay bills")

So, when a bill is paid by company A for company B:
In company A - I put the vendor and the amount of the bill and call the "account" Loan Company B. This brings the loan amount down in the COA for Company A.

Now in Company B, I have the vendor's bill entered in QB to be paid. How do I show this bill as paid as well as show the loan amount coming down in Company B's QB file?

God, I hope I'm making sense here. His CPA is swamped and don't have the time to work this through with me. I just wanted to get control of this before it snowballs into something.

Thanks for any help you can provide.
-Tia

[pjerb]

Hi Tia,
My suggestion would be to have company A write a check to Company B for the amount of the bills instead of paying the bills directly. Apply this check to the o/s loan balance due. Company B would then deposit the check and apply to loan on that side. Then you could write the checks as normal using the pay bills in QB from Company B. The bills need to be entered in Company B so the expenses are entered correctly. This way Company A is still paying Company B bills, and B still has correct expenses. Did I explain that clearly enough? If not, let me know and I'll try to be more specific.

[litlearth]

Yes. You explained it perfectly. Thank you. That is what I have them doing now.

The problem is, what is done already is what needs to be put in the proper places and I have no clue of how to get this to work. Now that the bills have all been paid and the accounts have been reconciled, I am stuck on how to show this in Company B.

Anymore suggestions? Anyone?

Thanks so much for responding Pamela. I appreciate any help.

-Tia

[pjerb]

I'll have to think on that on for a while. Company B would be the only one needing adjustments right? Since company A applied to loan when they wrote checks.

[litlearth]

Yep. That is absolutely correct. It is only company B that needs adjusting.

I have written a map to see if that would help me figure it out. LOL. I love puzzles, just not the ones that take days to complete.

Thanks for your help again (and don't stress yourself about it - I just wanted to put it out there to everyone to see if I am missing something).

-Tia

[bbSquire]

You can always enter adjusting entries through the General Journal for company B. When you go to select the accounts for input in the G/L all of the accounts will show up. It's a little longer but it can be done that way. In fact I have a client where 90% of the work I'm entering is through the G/L. She operates a not-for-profit charity where she buys things from stores and until the charity got off the ground (finally has) she has been using her own personal funds. I called that a loan from operator and use the G/L for anything that effects those types of transactions.

Kim.

[litlearth]

Hmmmm. OK. Thanks, Kim! I will try that and let you know how that goes.

[litlearth]

Kim,
This seems to work pretty good except for one thing - and maybe I haven't figured it out yet - how can I show that the vendors are paid on the company B side?

When I enter the information into the G/L for company B, it shows the loan amount decreasing (great) and it shows the account needed for the expenses in the P&L (just groovy). I will definitely use this method to show that company a has been paying company b.

However, the bills aren't getting knocked off for company b. I was hoping it would 'credit' the vendor account so I can 'pay' against the credit...but it doesn't show a credit to the vendor...hmmmm, now that I type that, do you think that's the way to knock the bills off of there? just add a credit memo and pay against the credit memo? I am trying to do all I can to not VOID the bills, but if I have to, I guess I have to. any suggestions on that one, anyone?

Thanks again!
Tia

[bbSquire]

Oop, when you said A was paying B's bills I thought you ment like hydro and rent. Ok, so you are trying to pay invoices for B, with funds from A.... Try setting up a new account called "Funds from A for bill payment". Set it up like a petty cash account, then pay the invoices from that. Even though A paid the bills directly it's like there is a cash pool (imaginary) that B is paying from.

Let me know if that works Tia.

Kim.

[bbSquire]

One more thing Tia, I forgot about the loan to A.

So, in companies B's books you might be able to do this....

When A pays an invoice or bill for B...
Loan to company A Debit $X
Funds from A for bill payment Credit $X

Then to record which invoice paid...

Funds from A for bill payment Debit $X
Account receivable XYZ Credit $X

Basically "Funds from A for bill payment becomes a contra account. This allows you to debit two liabilities. Just make sure you do 1 right after the other, and possibly set-up the Funds from A to not show on statements if the balance is 0. Oh, and don't forget to set-up Funds from A as a petty cash account or current asset account.

See if that's ok.