Intercompany Capital Transaction

[adnanmirza 1986]

Hi everyone, this is my first post ever in any accounting related question. I have a question with regards to the inter company journal entry. My boss formed a subsidiary co. recently.

Here is what we did....

Company A transferred to Company B (NEWLY Formed) USD 50,000, and after 3 months Company B returns back USD 50,000 to Company A.

I passed these entry in the books.

Company A

Drawings A/c 50,000
Bank 50,000

Company B

Bank 50,000
Capital 50,000


When Company B returns back cash

Company A

Bank 50,000
Drawings A/c 50,000

Company B

Drawings A/c 50,000
Bank 50,000


What I do not like here (and probably my boss will also not like) is Drawings A/c in new company. Is there any better entry someone can suggest? Would really appreciate your input.

 

[kirby]

You need a rock solid explanation of WHY Company B sent money to A. It could be that A has borrowed back the money so the accounts to use would be intercompany receivable for B and intercompany payable for A.