Journal Entries for Cash Transfer

[Ballscientist]

The parent and a subsidiary set up in the same book. There is no intercompany account in the liability section. When a parent transfers $20,000 to a subsidiary, how can I prepare a journal entry?

I am learning the basic accounting. I can't figure it out.

[Uncle Sam]

Entries for Cash Transfer

Intercompany accounts need to be set up for both parent and subsidiary.
When parent makes the transfer, parent makes this entry:
Dr.Subsidiary Receivable
Cr Cash

When subsidiary receives the transfer, it makes this entry
Dr.Cash
Cr. Parent Payable

[ballscientist]

Actually that is what I think.

Would it be possible to use the same account receivable?

For Parent - Debit Parent AR

For Subsidary - Credit Parent AR

[BOB W]

Intercompany

So you are saying that parent and sub are maintain in one set of book? If so, then you would treat transfers like checking account transfers, DEBIT ONE AND CREDIT THE OTHER. But, if within one set of books each company has its own chart of accounts (for financial statement purposes or tax reporting purposes), then you need to have an "inter-company exchange" account for each. At all times each company's account balance must equal each other. For financial statement purposes the intercompany account, based on debit or credit balance, would show up in the Asset or Liability section.

It is advisable to maintain separate set of books for each company, even if the sub is a disregarded entity for tax purposes. Financial reporting to management and general financial review of each operation is important so that a clear statement of operations can be seen.