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Paying Vendor Bills for Companies with Different Bank Accounts

How to pay vendor bills from different company bank accounts, record accurate journal entries, and manage intercompany payments efficiently.

Semmy Tan avatar
Written by Semmy Tan
Updated over 2 weeks ago

Vendor bills must be entered in for specific companies, and those companies have a specific operating (bank) account set. You can pay bills using a different bank account than the bill company's operating account, but there will be a warning informing you of the different account.

For example: a vendor has one bill for $150 that has two line items: $100 for Company A and $50 for Company B. Company A uses the operating account Bank A and Company B uses the operating account Bank B. A single bill payment of $150 is made from Bank A for this bill. The journal entries will be as follows:

  • In cash accounting:

    • The bill has no journal entries since no money has been paid yet.

    • The bill payment will have two journal entries:

      • On Company A's book, credit Bank A for $100 and debit an expense account for $100

      • On Company B's book, credit Bank A for $50 and debit an expense account for $50

  • In accrual accounting:

    • The bill will have two journal entries:

      • On Company A's book, credit Accounts Payable for $100 and debit an expense account for $100

      • On Company B's book, credit Accounts Payable for $50 and debit an expense account for $50

    • The bill payment will have two journal entries:

      • On Company A's book, credit Bank A for $100 and debit Accounts Payable for $100

      • On Company B's book, credit Bank A for $50 and debit Accounts Payable for $50

A manual journal entry can then be created on the same date as the bill payment to record the liability that Company B owes to Company A instead of Company B having a negative balance in Bank A.

  • Company B - debit Bank A for $50 so Company B will have a $0 balance in that bank account

  • Company B - credit a liability account for the $50 owed to Company A

  • Company A - credit Bank A for $50 so Company A will have an accurate bank balance since the $50 was originally recorded on Company B's book

  • Company A - debit some asset account for the receivable owed by Company B

When Company B pays back Company A, another manual journal entry can be created to record the transfer. 3 of the 4 line items are simply reversing the previous manual journal entry.

  • Company B - credit a bank account belonging to Company B to record the payment going to Company A for the money owed

  • [Reversal] Company B - debit the liability account for money owed to Company A that is now paid

  • [Reversal] Company A - debit Bank A for money received from Company B

  • [Reversal] Company A - credit the asset account for the receivable owed by Company B that is now paid

This is commonly used when one company (usually the property management company) pays bills on behalf of another company, and then collects the funds back at a later time.

You can track these bills by generating an Account Activity report under Reports > Accounting. In Preview Parameters, set Account to Bank A and Company to Company B. In the screenshot here, Bank A is "Chase Account" and Company B is "Trantow-Barton":

If you never want to pay bills from a different company's operating account, you can edit the bank account to only be linked to a single specific company.

If a bank account is linked to only a single specific company, payments cannot be made to other companies using that bank account. If you attempt to submit such a transaction, you will get an error message. Linking a bank account to a single company is useful for avoiding user errors if you have a separate bank account for each of your companies.

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