I am a bookkeeper to balance sheet here in south Africa. I am doing
the books for a holding company with a sub company. I would like to
know how to report on each company on their own and how to report on
the inter company loan account. I would also like to know what is the
proper enty for depreciation and accumulative depreciation.
I know that depreciation is a debit and is an income statement account.
Does this mean the the Accumulative depreciation will be a credit and
then be reflected in the balance sheet?
Part of it depends on whether or not there are separate companies.
If not you can account for them using classes. If they are you must
keep a different set of books for each company. YOu can then set up an
account for Intercompany Transfers. It doesn't really matter if it is
an asset or a liability account. What may decide that is whether one
company is more likely to "borrow" from the other. The more frequent
"borrower" would most likely be the one to have it as a liability
account, and the "lender" the asset.
When you transfer goods or cash, the offsetting account to the cash or
inventory credit would be a debit to the Interco for the lender. The
borrower would credit the Interco account to offset the debit to cash
or inventory. When the "borrower" pays back the "lender" do the
Depreciation (or amortization) is the process by which an asset has its
value distributed to expense over the useful life of the asset. You
must determine the method used for depreciation, and there are several:
straight line (expneses an equal amount to depreciation expense through
the useful life of the asset), declining balance (uses a gradually
reducing amount to depreciation), sum of years (uses a gradually
increasing amount), units of production (depreciation based on a set
amount per unit of production) and sinking fund (assigns the
depreciated amount to a fund designed to save money to purchase
replacement assets). This can get complicated, and different tax rules
apply to which you may use for tax purposes as opposed to financial
When you depreciate capital assets, you record the original amount of
the asset in an asset account, an you record the Accumulated
Depreciation in a contra-asset account for EACH asset category
(computer equipment, vehicles, equipment, office equipment, furniture &
fixtures, etc.). YOu match the depreciation expense amount and record
the credit side to the Accumulated Depreciation for that asset. So, the
Accum Depn does indeed appear on the Balance Sheet.
thank you so much, this explains why the whole entry was wrong. on
both sides, I had the account as a liability instead of making the
lender the asset and the borrower the liaibility. Thanx so much, hope
you stick around because I manage to get myself into quite a bit of
tricky stuff from time to time.
lots of love
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