Intercompany
This query is : Resolved
08 December 2016
If Parent company pays salary to Subsidiary company.
What is the journal entries in both the companies.
08 December 2016
please tell me the journal entries if parent company pays salary of subsidiary company.
please tell me the journal entries in both books of accounts
09 December 2016
It is loan to subsidiary company, pass payment entry accordingly. Salary payment to be recorded in Subsidiary company
09 December 2016
thank you Jain for your answer.
could you please tell me what Journal entries Will come in both books of accounts
01 August 2024
When a parent company pays the salary of a subsidiary company, the accounting entries should reflect the transactions accurately in both companies' books. Below are the journal entries for both the parent company and the subsidiary company.
### **1. Parent Company**
**At the Parent Company (making the payment):**
1. **To record the payment of salary on behalf of the subsidiary:**
- **Journal Entry:**
```
Dr. Salary Expense (Subsidiary) xxx
To Bank (or Cash) xxx
```
- **Explanation:** The parent company records the salary expense as an outflow of cash or bank balance, representing the amount paid to cover the salary expenses of the subsidiary.
2. **To record the amount payable to the subsidiary:**
- **Journal Entry:**
```
Dr. Intercompany Receivable xxx
To Bank (or Cash) xxx
```
- **Explanation:** The parent company recognizes a receivable from the subsidiary since the payment made will be reimbursed or settled later.
### **2. Subsidiary Company**
**At the Subsidiary Company (salary expense paid by the parent):**
1. **To record the receipt of salary payment from the parent company:**
- **Journal Entry:**
```
Dr. Bank (or Cash) xxx
To Intercompany Payable xxx
```
- **Explanation:** The subsidiary company records the amount received from the parent company as a liability, indicating that it is obligated to reimburse the parent company.
2. **To record the salary expense:**
- **Journal Entry:**
```
Dr. Salary Expense xxx
To Bank (or Cash) xxx
```
- **Explanation:** The subsidiary company records the salary expense in its books, matching the expense with the payment received from the parent company.
### **Summary of Entries**
**Parent Company:**
1. Dr. Salary Expense (Subsidiary)
To Bank (or Cash)
2. Dr. Intercompany Receivable
To Bank (or Cash)
**Subsidiary Company:**
1. Dr. Bank (or Cash)
To Intercompany Payable
2. Dr. Salary Expense
To Bank (or Cash)
### **Points to Note:**
- Ensure that both companies reflect these transactions accurately to maintain consistency in intercompany accounting.
- The intercompany receivable and payable entries ensure that the transactions between the parent and subsidiary are properly recorded and can be reconciled.
By following these journal entries, both the parent and subsidiary companies can accurately account for the salary payments and related intercompany transactions.
### **1. Parent Company**
**At the Parent Company (making the payment):**
1. **To record the payment of salary on behalf of the subsidiary:**
- **Journal Entry:**
```
Dr. Salary Expense (Subsidiary) xxx
To Bank (or Cash) xxx
```
- **Explanation:** The parent company records the salary expense as an outflow of cash or bank balance, representing the amount paid to cover the salary expenses of the subsidiary.
2. **To record the amount payable to the subsidiary:**
- **Journal Entry:**
```
Dr. Intercompany Receivable xxx
To Bank (or Cash) xxx
```
- **Explanation:** The parent company recognizes a receivable from the subsidiary since the payment made will be reimbursed or settled later.
### **2. Subsidiary Company**
**At the Subsidiary Company (salary expense paid by the parent):**
1. **To record the receipt of salary payment from the parent company:**
- **Journal Entry:**
```
Dr. Bank (or Cash) xxx
To Intercompany Payable xxx
```
- **Explanation:** The subsidiary company records the amount received from the parent company as a liability, indicating that it is obligated to reimburse the parent company.
2. **To record the salary expense:**
- **Journal Entry:**
```
Dr. Salary Expense xxx
To Bank (or Cash) xxx
```
- **Explanation:** The subsidiary company records the salary expense in its books, matching the expense with the payment received from the parent company.
### **Summary of Entries**
**Parent Company:**
1. Dr. Salary Expense (Subsidiary)
To Bank (or Cash)
2. Dr. Intercompany Receivable
To Bank (or Cash)
**Subsidiary Company:**
1. Dr. Bank (or Cash)
To Intercompany Payable
2. Dr. Salary Expense
To Bank (or Cash)
### **Points to Note:**
- Ensure that both companies reflect these transactions accurately to maintain consistency in intercompany accounting.
- The intercompany receivable and payable entries ensure that the transactions between the parent and subsidiary are properly recorded and can be reconciled.
By following these journal entries, both the parent and subsidiary companies can accurately account for the salary payments and related intercompany transactions.
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