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, creditBank A
for $100 and debit an expense account for $100On
Company B
's book, creditBank 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, creditAccounts Payable
for $100 and debit an expense account for $100On
Company B
's book, creditAccounts Payable
for $50 and debit an expense account for $50
The bill payment will have two journal entries:
On
Company A
's book, creditBank A
for $100 and debitAccounts Payable
for $100On
Company B
's book, creditBank A
for $50 and debitAccounts 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
- debitBank A
for $50 soCompany B
will have a $0 balance in that bank accountCompany B
- credit a liability account for the $50 owed toCompany A
Company A
- creditBank A
for $50 soCompany A
will have an accurate bank balance since the $50 was originally recorded onCompany B
's bookCompany A
- debit some asset account for the receivable owed byCompany 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 toCompany B
to record the payment going toCompany A
for the money owed[Reversal]
Company B
- debit the liability account for money owed toCompany A
that is now paid[Reversal]
Company A
- debitBank A
for money received fromCompany B
[Reversal]
Company A
- credit the asset account for the receivable owed byCompany 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.