How to transfer funds between bank accounts/different companies????

Good Morning:

Could someone please advise the correct journal entry for transfering funds from one bank account to another bank account but different company???  Obviously I have to set up a new account for this but not sure the correct entry.  For example: 

I have two companies set up in Simply Accounting - the new company has had to borrow or transfer funds from the old company to cover expenses etc.etc.  Not exactly sure the correct entry for doing this????

Thanks for your help!



  • Hi there:   In each company you need to set up an account in your Chart of Accounts to record the other side of the transfer.  So if one company is ABC Company Ltd. and the other is DEF Company Ltd. then set up in the current asset or current liability section an account called Receivable From/Payable To ABC Company (set this up in DEF Company's Chart of Accounts) and Receivable From/Payable To DEF Company (set this up in ABC Company's Chart of Accounts).    Now that you have an account to keep track of the transfers then you can proceed with your journal entries to record the transfers. 

    If ABC Company loans $5,000.00 to DEF Company then the journal entry to record the transfer would be:

    Dr. Receivable from/Payable to DEF Company      $5,000.00   Cr.  Bank              $5,000.00

    To record the transaction in DEF Company's books the journal entry to record the receipt of the transfer would be:

    Dr.  Bank             $5,000.00                Cr. Receivable from/Payable to ABC Company     $5,000.00

    This will show that ABC Company loaned DEF Company $5,000.00 and in DEF Company's books it will show that DEF Company owes ABC Company $5,000.00.

    Hope this helps.     Rita Deering

  • I have a similar issue, except I need to record a transfer of cash between the bank accounts of two companies, both with the same owner. One of the companies was created strictly to manage the mortgage, and regularly has funds transferred from the other company's assets. Since this is NOT a loan, I'm not quite sure how to classify the corresponding account. Any suggestions would be a big help.

  • Hi there:  If the company receiving the money is not going to be obligated to pay it back to the lending company, then the funds received need to be classified as "income" of some kind.  Is this what they intended when the second company was set up?  I'm not sure why a second limited company would be set up strictly to manage a mortgage (for what property?).  Is the property that the mortgage is on   in the current assets of the first company?  Or is the property that is mortgaged also in that company's books?   A little more information about what exactly the purpose is behind having the second company would be helpful in giving you a truly correct answer to your question.   R. Deering

  • Sorry, here's the deal: Company A is the original company, with most of the assets. Company B has both the mortgage and the purchased property in its books. The purchased property is an office that is occupied and used by Company A. (I think they plan to purchase more property holdings in the future, with Company B). It looked like I would have to record the transfers as revenue/expenses, but I wasn't sure if that would cause problems with the income statement.

  • Hi again:  It sounds like Company A is paying rent to Company B.  You should probably set up a formal rental agreement between Company A and Company B and then classify the amount paid by A to B as "Rental Income" which is what is would be considered to be, yes?   What sort of "problems with the income statement" do you mean?   If Company B is receiving income from the office space it is "income" to that company. 

    Also, because the two companies have the same owner, you can make an arrangement not to charge GST on the rental amount I believe.  You need to fill in the proper form for this though.  Check with your accountant.   Company B should be charging Company A GST on the rental amount to be on the safe side though.  (This is assuming that the companies are registered for GST).   Rita Deering

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