Accounting - Intercompany Accounts?

Question

We have been bought by a group of companies, and I have set up a new nominal account for the Intercompany account. Where should this sit on the balance sheet?

I imagine it would sit in the current liabilities, but would this be the case as very often the Group would be owing to us (asset) - should I leave this in liabilities but with a negative figure?

Thanks,

Answer 1

Technically you should move the account back and forthe between assets and liabilities depending on which way the balance was going. However, if you anticipate that this balance will switch frequently, it will be a pain to keep moving it. I would say that on your trial balance, you can keep it in one location, but if you ever prepare a financial statement for your individual company, you will want to make sure it is on the correct side of the balance sheet. When the companies as a group prepare a consolidated financial statement, the inter-company accounts will be eiliminated anyways. Keep in mind that GAAP does allow for consideration of materiality and cost vs. benefit.

Answer 2

GAAP doesn't allow offsetting of accounts, so it's inadvisable to have brackets with your figures. You'll have an a/c called something like "Amount due from holding co./related co." or "Amount due to holding co./related co." and it might be in current assets or current liab. depending on whether it's a debit or credit balance. On top of this, you need to split up the balance between trade and non-trade balances.