Do Your Intercompany Loan Accounts Balance?
One transfer. Two company files. The same balance—seen from opposite sides. When those figures disagree, the difference needs to be found before it becomes part of your reporting.
🥕 Ask About a Loan Reconciliation
The entry belongs in both company files.
Suppose Coastal Landscaping Pty Ltd transfers $120,000 to Coastal Property Maintenance Pty Ltd to help cover supplier costs. The transaction is viewed differently in each set of books, but it refers to the same money.
Company A: the lender
Records an intercompany loan receivable—money owed back to Company A.
$120,000 receivableCompany B: the borrower
Records an intercompany loan payable—money Company B owes to Company A.
$120,000 payableReports can look convincing while the underlying relationship is wrong.
Unreliable balance sheets
Assets and liabilities may be misstated, making one entity appear stronger or weaker than it really is.
GST inconsistencies
Different tax coding between files can affect BAS figures and may require investigation or correction.
Duplicated expenses
A cost can be claimed in both entities when one company paid and the other also records the supplier bill.
Cash flow confusion
Money that appears available in one company may, in substance, be owed to another group entity.
Year-end delays
Accountants must spend time tracing old differences before reliable accounts and returns can be prepared.
Questions from advisers
Banks, buyers, auditors and accountants commonly query material unreconciled related-party balances.
Most differences begin with an ordinary transaction.
The transfer itself is rarely mysterious. The mismatch usually comes from how the two sides were recorded—or from one side not being recorded at all.
- A transfer is coded to the loan account in one file but to an expense or income account in the other.
- One company pays a supplier bill on behalf of the other.
- GST is applied differently between the two entries.
- A repayment is entered for a different amount or date.
- A journal is duplicated, reversed incorrectly or missing.
- Opening balances were never agreed when the files were set up.
Reconcile the relationship—not just each bank account.
A monthly intercompany reconciliation keeps small differences from becoming a year-end investigation.
Run both loan account reports to the same date
Use an identical month-end date and confirm you are comparing the matching related-party accounts.
Compare opening balances and movements
Match transfers, bills paid on behalf of another entity, repayments and journals line by line.
Investigate every difference
Check bank evidence, invoices, tax coding, dates and supporting documents rather than posting an unexplained balancing journal.
Correct, document and sign off
Post supported corrections in the appropriate files, save the reconciliation and record who reviewed it.
One supplier cost should not quietly become two expenses.
If Company A pays a $2,500 bill that belongs to Company B, Company A will generally record the amount through the intercompany loan rather than treating it as its own operating expense. Company B records its expense and the corresponding amount owed to Company A, with GST treatment based on the actual documents and circumstances.
If both companies simply record the expense, the group records can overstate costs and the loan accounts will not agree. The correction should follow the invoice, payment evidence and advice appropriate to the entities—not a convenient plug figure.
Some differences need more than a bookkeeping entry.
A bookkeeper or BAS agent can reconcile the records, identify missing or inconsistent transactions and address bookkeeping or BAS matters within their professional scope. The correct treatment can also depend on loan agreements, ownership, tax grouping, the recipient of a payment and whether a director or shareholder is involved.
Questions involving income tax, Division 7A, solvency, legal agreements or disputes should be reviewed by the appropriate accountant, registered tax agent or lawyer. A mismatch does not automatically mean those rules apply—but it is a reason to investigate promptly.
Make the loan reconciliation part of month-end.
- Use a separate account for each related entity
- Apply consistent account names in both files
- Attach invoices and payment evidence
- Use a clear month-end cut-off date
- Review GST coding on on-behalf payments
- Avoid unexplained balancing journals
- Keep a dated reconciliation worksheet
- Escalate tax or legal questions early
Intercompany loan account FAQs
What is an intercompany loan account?+🐰
It records money owed between related entities. The lender usually records a receivable, while the borrower records the corresponding payable.
Should the two intercompany loan balances match?+🐰
They should agree for the same relationship and reporting date, although accounting software may display the balances with opposite signs because one is an asset and the other is a liability.
Why do matching balances sometimes have opposite signs?+🐰
One entity is owed money and records an asset; the other owes money and records a liability. The economic amount matches even though debit, credit or report-sign conventions differ.
Is GST charged on an intercompany money transfer?+🐰
A transfer of loan principal is generally different from a taxable sale, but GST treatment can depend on what the payment represents. Bills paid on behalf of another entity need to be reviewed against the tax invoice and circumstances.
How often should intercompany loans be reconciled?+🐰
Monthly is a sensible control for active related entities. High-volume groups may need more frequent review, while inactive balances should still be checked at reporting dates.
What if the mismatch has existed for years?+🐰
Start with the last date the balances agreed, then trace transactions forward using bank statements, invoices, journals and lodged records. Avoid forcing the accounts to match without evidence.
Does an intercompany mismatch create Division 7A issues?+🐰
Not automatically. Division 7A depends on the parties and transactions involved. If shareholders, associates or private company payments are relevant, obtain advice from a registered tax agent or tax adviser.
Who should fix an intercompany loan difference?+🐰
An experienced bookkeeper or BAS agent can perform the reconciliation and correct matters within scope. Your accountant or tax adviser should review tax treatment, historical return impacts and complex related-party arrangements.
Find the difference before it follows you into another month.
My Great Bookkeeper can review the loan ledgers, trace the transactions and help establish a repeatable reconciliation process for your related entities.
🥕 Talk to My Great Bookkeeper