Reconciliation of an Invoice by a loan account

Samantha Dwyer

Hello,

We have 2 businesses. Business 1 has sold some assets to Business 2. Accountant told me I need to raise an invoice from B1 to B2 and then reconcile this invoice with a loan account which B2 will slowly pay off.

What I need to end up with is an invoice that shows 'paid' and the loan showing in the balance sheet.

Hope this makes sense.

Thanks!

Datarec

Here's a simplified version on a way to handle a business transaction where one company (B1) sells assets to another company (B2) on credit.

1. Create an invoice:
   • B1 makes an invoice for B2, listing what was sold and how much is owed.
   • The invoice should say it's a loan to be paid over a period of time.
2. Record the loan:
   • B2 records this as a loan in their accounting books.
   • Can be entered as a journal (debit asset account for the assets purchased, credit the loan account for the amount owed to B1) to show the new assets they bought and the money they owe.
3. Handle payments:
   • As B2 pays off the loan bit by bit, they record each payment.
   • This reduces how much they owe over time.
   • (debit loan account to reduce the liability, credit the bank account to show the cash outflow)
4. Mark the invoice as paid:
   • Once B2 pays off the full amount, B1 marks the invoice as 'paid' in their records.
5. Keep everything balanced:
   • Both companies should regularly check their records to make sure the loan amount and payments match up.

This process helps both businesses keep accurate financial records and follow proper accounting rules.