One branch paying cash on account of expenses by other branch- Centralized Accounting

[Abdul Qayyum]

Branches do not debit/credit each other and using centralized accounting.

One branch paid out cash for expenses of another branch, what accounting entry will be passed by the paying branch?

 

[bklynboy]

We create a type of intercompany between the branches to show what is owed. So we record on Branch making making a debit to Receivable from Branch 2 and credit to cash and on Branch 2 we show a debit to Expense and credit to payable to Branch 1. You then move cash between each branches bank account to clear the Payable/Receivable.