more-arw search

Q&A Forum

How to account for Intercompany shared expenses?

If a company shares expenses with its subsidiary, e.g. rental, electricity and water fee. The Parent company pays all these fees and need to recharge to its subsidiary. Which is the most suitable way to account for these expenses and the principles behind?

1. Parent Company: debit all these expenses in full amount in the first place and then credit those expenses for the amount shared by the subsidiary.
2. Parent Company: debit all these expenses in full amount and consider the amount shared by the subsidiary as income (credit to revenue)

In the subsidary accounts, debit the amount payable to the Parent company in the related account, ie rental, electricity and water fee.

Another question, is it better to sum up those expenses as a "management fee" to charge to the subsidiary?


Gurusevak Khalsa
Title: CFO
Company: Seva Consulting
(CFO, Seva Consulting) |

Post all expenses in the parent expense account. Then the Parent Co would credit that expense account and debit a interco receivable asset account. The subsidiary would debit their expense account and credit an interco payable liability account. The two interco accounts must always offset each other on the consolidated financials.


Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.