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How to set up and post Inter-Company nominal transfers

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Summary

How to set up inter-company transfers in Sage Accounts.

Description

If you run multiple companies in Sage Accounts and transfer assets or liabilities between them, use Inter-Company nominal codes. These codes don’t link companies but help track transferred values within the group.

Resolution

Creating the nominal codes

The first thing to do is to create the intercompany nominal codes via the steps below. If you have already done that, you can continue to the processing methods;

  1. Click Nominal codes, then click New/edit.
  2. Complete the nominal record as follows:
Nominal Code Name
Company giving asset - 1300 Inter-Company Transfer
Company receiving asset - 2302 Inter-Company Transfer
Company receiving asset - 2120 Inter-company Transfer
  1. Click Save, then click Close.

If the company receiving the asset expects to pay the liability within one year, set up the nominal code in the Current Liabilities section. For example, 2120.

You have now created the new nominal codes. Now, check the Chart of Accounts to ensure it includes the new code which includes it in the calculations for the Balance Sheet report.

Processing entries

Method 1: Journal Entries or Bank Transactions for Loans or Asset Transfers

Use this method when one company loans money or transfers an asset to another company. It’s suitable for non-VAT-related transfers or when you're not on the VAT Cash Accounting scheme.

▼Process transactions for inter-company transfers - Method 1

In this example, the parent company has given the subsidiary company a £/€5,000 loan. This will appear as a current asset on the parent company's Balance Sheet report and as the loan won’t be repaid within one year, as a long-term liability on the subsidiary company's Balance Sheet report. To record this you need to post the following:

To record the inter-company transaction in the company giving the asset

  1. Click Nominal codes then click Journal entry.
  2. Enter the date and reference, then enter the relevant information to record the inter-company transfer, for example:
N/C Name Details T/C Debit Credit
1200 Bank Account Inter-Company Transfer T9   5000.00
1300 Inter-Company Transfer Inter-Company Transfer T9 5000.00  

If the inter-company transfer relates to stock or an asset, then substitute the bank account nominal code with the relevant asset nominal code.

  1. Click Save then click Close.

You have now posted the inter-company transaction in which the company giving the asset. In our example, this transaction has reduced the bank account balance, and increased the value on the Inter-Company Transfer nominal code. Now post the inter-company transaction in the company receiving the asset.

To record the inter-company transaction in which the company receiving the asset

In this example, the subsidiary company has received a £/€5,000 loan from the parent company. As this loan won’t be repaid within one year, it will appear as a long-term liability on the subsidiary company's Balance Sheet report.

  1. Click Nominal codes then click Journal entry.
  2. Enter the date and reference, then enter the relevant information to record the inter-company transfer, for example:
N/C Name Details T/C Debit Credit
1200 Bank Account Inter-Company Transfer T9 5000.00  
2302 Inter-Company Transfer Inter-Company Transfer T9   5000.00

If the inter-company transfer relates to stock or an asset, then substitute the bank account nominal code with the relevant asset nominal code.

  1. Click Save, then click Close.

You have now posted the inter-company transaction in which the company receives the asset. In our example, this transaction has increased the bank account balance and increased the value on the Inter-Company Transfer nominal code.

Alternatively, you could post the transfer using bank transactions:

To record the inter-company transaction in the company that’s giving the asset using bank transactions

  • A bank payment and a bank receipt in the company, giving the asset

This reduces the balance on the asset nominal code. For example, the bank, stock or asset nominal code. It also increases the balance on the Inter-Company nominal code, which then appears as a current asset on the Balance Sheet report.

To record the inter-company transaction in the company receiving the asset using bank transactions

  • A bank receipt and a bank payment in the company receiving the asset

This increases the balance on the asset nominal code. For example, the bank, stock or asset nominal code. It also increases the balance on the Inter-Company nominal code, which then appears as a long-term liability on the Balance Sheet report.

If you are on the VAT Cash Accounting scheme instead of posting journals to record the inter-company transfer, post a supplier payment and a bank receipt. To do this refer to the following section To process transactions for inter-company transfers - Method 2.

Method 2: Handling Inter-Company Payments for Supplier Invoices

Use this method when one company pays a supplier invoice on behalf of another. It ensures that VAT is handled correctly and that the inter-company balances are accurately reflected.

▼Process transactions for inter-company transfers - Method 2

In this example, an outstanding purchase invoice for £/€100 on the subsidiary company's purchase ledger has been paid by the parent company. The subsidiary company will repay the parent company within one year.  To record this in Sage Accounts, you need to post the following:

  • A bank payment in the company paying the supplier invoice - This reduces the parent company's bank account balance. It also increases the balance on the Inter-Company nominal code, which appears as a current asset on the Balance Sheet report
  • A supplier credit in the company with the outstanding supplier invoice - This transaction pays the outstanding supplier invoice and posts a credit balance to the current liability Inter-Company nominal code. If you are on the VAT Cash Accounting scheme instead of posting a credit note and post a supplier payment and a bank receipt. The supplier payment shows the invoice as paid and records the correct information on your VAT return. The bank receipt moves the value of the payment from your bank to the current liability Inter-Company nominal code

To post a bank payment in the company paying the supplier invoice,

In this example, the value of the outstanding supplier invoice is £/€100.00.

  1. Click Bank accounts, then click Bank payment.
  2. Enter the relevant information into the Bank Payments window, for example:
Bank Date Ref N/C Details Net T/C Tax
Bank account from which the supplier invoice is paid Date Ref 1300 Inter-Company Transfer 100.00 T9 0.00

If required, enter a department for the transaction into the Dept column.

  1. Click Save, then click Close.

You’ve recorded the payment of the supplier invoice from the relevant company. The value of the supplier invoice appears as a current asset on your Balance Sheet report.

To post the supplier credit - Standard VAT

Only post a supplier credit if you are on the standard VAT scheme. If you are on the VAT Cash Accounting scheme, post a supplier payment and a bank receipt. For further information about this, refer to the following section to post the supplier payment and bank receipt.

  1. Click Suppliers, then click Batch credit.
  2. Enter the relevant information into the Batch Supplier Credits window, for example:
A/C Date Credit Note N/C Details Net T/C Tax
Supplier's account reference Date Credit number 2120 Inter-company transfer 100.00 T9 0.00

If required, enter a department for the transaction into the Dept column.

  1. Click Save, then click Close.

You have now posted the supplier credit; give this to the outstanding supplier invoice. When you pay the liability to the parent company, post a bank payment to the current liability nominal code. For further information about either of these procedures, press F1 to open the Help system.

To post the supplier payment and bank receipt - VAT Cash Accounting

Only post a supplier payment and a bank receipt if you are on the VAT Cash Accounting scheme. If you are on the standard VAT scheme, post a supplier credit. For further information about this, refer to the previous section on posting the supplier credit.

  1. Click Bank accounts and select the relevant bank, then click Supplier payment.

    A supplier payment and bank receipt will be posted to this bank account. The net effect of these two transactions is zero.

  2. From the Payee drop-down list, choose the supplier you want to pay.
    A list of outstanding transactions for the selected supplier appears.
  3. Enter the amounts in the Payment column against the invoices you want to pay.
  4. Click Save, then click Close.
  5. Click Bank receipt and enter the relevant information into the Bank Receipts window.
Bank Date Ref N/C Details Net T/C Tax
Bank account from which the supplier payment was posted. Relevant date Ref 2120 Inter-Company Transfer 100.00 T9 0.00

If required, enter a department for the transaction into the Dept column.

  1. Click Save, then click Close.

You have now posted the relevant transactions to record the payment of the invoice and the liability to the parent company. When you pay the liability to the parent company, post a bank payment to the current liability nominal code. For further information about either of these procedures, press F1 to open the Help system.

 

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