Loans

spurschic1@yahoo.com

Hi All,

Wondering if you can help?

I have company A that pays a loan for company B. Company B pays company A back with a dividend throughtout the year, how do I show these on the P&L/BS?

Thanks
Vicky

stefanboro

Hi Vicky,

Assuming company A does not charge company B any interest then all that's happened is a simple balance sheet liability transfer from the perspective of company B.

Company B has been relieved of one liability to whomever it owed the money to but in turn now has the same liability to company A.

Dr Liability to whomever on Bal Sheet
Cr Liability to Company A

Company A:

Dr Asset Loan to Company B
Cr Bank

Assuming again that Company B is a subsidiary of Company A then it's up to you (or should I say the directors) whether or not the transfer of resources are just dividends or paying the loan back.

Assuming then that the transfers are to pay the loan back then from the perspective of company B:

Dr Liability to Company A
Cr Bank

Company A:

Dr Bank
Cr Asset loan to company B

Shoot me down if I made any mistakes here but don't think I did.