Accounting Entries Library
Learn how business transactions are recorded through practical
journal-entry examples. Each scenario explains the business
situation, entries in the relevant companies, the accounting
logic, and the reconciliation checks.
Current topic: Intercompany Accounting
GST/VAT, withholding taxes, and other adjustments are excluded
unless specified. Actual accounting treatment depends on the
applicable accounting standards, tax rules, transaction facts,
and company policies.
Intercompany Sale of Goods
Business situation: Company A sells goods worth
₹1,00,000 to Company B on credit.
Company A — Seller
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Intercompany Receivable | 1,00,000 | — |
| Intercompany Sales | — | 1,00,000 |
Company B — Buyer
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Inventory / Purchases | 1,00,000 | — |
| Intercompany Payable | — | 1,00,000 |
Why? The seller records revenue and a receivable.
The buyer records the goods received and a payable.
Company A’s receivable should match Company B’s payable, subject
to timing, currency, and other differences.
Intercompany Service Charges
Business situation: Company A provides IT support
services worth ₹50,000 to Company B.
Company A — Service Provider
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Intercompany Receivable | 50,000 | — |
| Intercompany Service Revenue | — | 50,000 |
Company B — Service Recipient
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| IT Support Expense | 50,000 | — |
| Intercompany Payable | — | 50,000 |
Why? Company A recognises service revenue, while
Company B recognises the cost. If the service qualifies for
capitalisation, Company B may need to debit an asset instead.
Match the service period, invoice number, amount, and currency
in both companies’ books.
Intercompany Loan
Business situation: Company A lends ₹5,00,000
to Company B, and the funds are transferred through the bank.
Company A — Lender
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Intercompany Loan Receivable | 5,00,000 | — |
| Bank | — | 5,00,000 |
Company B — Borrower
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank | 5,00,000 | — |
| Intercompany Loan Payable | — | 5,00,000 |
Why? The lender records a financial asset and
the borrower records a financial liability.
Confirm the principal, transfer date, repayment terms, interest
rate, and loan agreement.
Interest on an Intercompany Loan
Business situation: Interest of ₹10,000 has
accrued on the loan but has not yet been paid.
Company A — Lender
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Interest Receivable | 10,000 | — |
| Interest Income | — | 10,000 |
Company B — Borrower
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Interest Expense | 10,000 | — |
| Interest Payable | — | 10,000 |
Why? Interest is recognised as it accrues when
required by the applicable accounting policy, rather than waiting
for cash payment.
Compare the principal, interest rate, accrual period,
calculation, and payment terms.
Settlement of an Intercompany Balance
Business situation: Company B pays Company A
₹1,00,000 to settle an outstanding invoice.
Company A — Receives Payment
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Bank | 1,00,000 | — |
| Intercompany Receivable | — | 1,00,000 |
Company B — Makes Payment
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Intercompany Payable | 1,00,000 | — |
| Bank | — | 1,00,000 |
Why? The payment clears the receivable in
Company A’s books and the payable in Company B’s books.
Match the bank value date, payment reference, invoice allocation,
and amount. The two bank postings may fall in different periods.
Foreign-Currency Intercompany Invoice
Business situation: Company A has INR as its
functional currency and issues an invoice for USD 10,000.
The transaction-date exchange rate is ₹83 per USD.
Company A — INR Functional Currency
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Intercompany Receivable | 8,30,000 | — |
| Intercompany Sales | — | 8,30,000 |
Calculation: USD 10,000 × ₹83 = ₹8,30,000.
Why? The invoice is initially recorded in the
company’s functional currency using the applicable transaction-date
exchange rate.
Compare the original USD amount, transaction-date rate, INR
equivalent, invoice date, and currency recorded by Company B.
Company B’s functional currency may differ.
Foreign-Exchange Gain or Loss
Business situation: Company A has an outstanding
receivable of USD 10,000 initially recorded at ₹83 per USD.
At the reporting date, the applicable closing rate is ₹85 per USD.
Initial value: ₹8,30,000
Reporting-date value: ₹8,50,000
Increase: ₹20,000
Company A — INR Functional Currency
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Intercompany Receivable | 20,000 | — |
| Foreign Exchange Gain | — | 20,000 |
Why? Under the assumed facts, the receivable’s
INR value increases, creating a foreign-exchange gain. A lower
applicable closing rate could produce a loss instead.
Verify the foreign-currency balance, closing rate, reporting
date, and remeasurement calculation.
Intercompany Credit Note
Business situation: Company A issues a credit
note of ₹10,000 to Company B because of a price adjustment.
Company A — Seller
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Sales Returns / Revenue Adjustment | 10,000 | — |
| Intercompany Receivable | — | 10,000 |
Company B — Buyer
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Intercompany Payable | 10,000 | — |
| Inventory / Purchases / Expense Adjustment | — | 10,000 |
Why? The credit note reduces the amount Company B
owes and adjusts the original transaction. Company B’s credit account
depends on how the original transaction was recorded.
Confirm that both companies recorded the same credit note against
the correct invoice and accounting period.
Intercompany Expense Recharge
Business situation: Company A pays a third-party
software invoice of ₹50,000 for software used by Company B.
Company A is acting as the paying agent, and the cost belongs to B.
Company A — Pays on Behalf of Company B
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Intercompany Receivable | 50,000 | — |
| Bank | — | 50,000 |
Company B — Records Its Cost
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Software Expense | 50,000 | — |
| Intercompany Payable | — | 50,000 |
Why? Company A records the amount recoverable
from Company B, while Company B recognises its cost.
Retain the supplier invoice, payment evidence, allocation basis,
and recharge documentation. If Company A originally booked the
cost as its own expense, the correct reclassification depends
on the facts and accounting policy.
Intercompany Reconciliation Mismatch
Business situation: Company A reports a
receivable of ₹1,00,000, while Company B reports a payable of
₹90,000. Investigation identifies a valid ₹10,000 invoice that
Company B has not recorded.
Company B — Records the Verified Missing Invoice
| Account | Debit (₹) | Credit (₹) |
|---|---|---|
| Relevant Expense / Asset | 10,000 | — |
| Intercompany Payable | — | 10,000 |
Why? Company B records the verified transaction
missing from its books. The debit account depends on the nature
of the original purchase or service.
Expected result: Company B’s payable becomes
₹1,00,000 and matches Company A’s receivable, assuming there are
no other differences.
Never post an arbitrary balancing entry just to make the ledgers
match. Investigate missing invoices, credit notes, payments,
foreign-exchange differences, and timing differences first.
Post an adjustment only when supported by evidence.