Share this content

Trade creditors or intercompany?

Stat accounts disclosure query

Didn't find your answer?

Apologies for the question - Friday afternoon brain not functioning clearly.

I have 2 ltd co clients - each 100% owned by the same sole director. One company much older and bigger than the other and purchases all of small co's products for resale and incurs some of their costs (eg small co has no staff/payroll/office space).  Proper VAT invoices are raised for the cost of sales and management fees. But there is also quite a bit of "intercompany" shenanigans with big co randomly paying invoices of small co (eg insurance, accounts fees).

At small co year end there is a combination of trade creditors and intercompany balance for amounts due to big co.

My question - is this really an intercompany balance (given their only connection is the common director/shareholder) and both balances at the year end should be added together and disclosed as "other creditors" or do I disclose as two amounts separately in "trade creditors" for the unpaid invoiced balances and "other creditors" for the rest?

Thanks in advance

Replies (9)

Please login or register to join the discussion.

ALISK
By atleastisoundknowledgable...
30th Jul 2021 16:26

We would typically move the Trade balance and have everything under interco, but if the invoices are actually going to be paid, you should probably leave them as a trade balance.

Thanks (1)
Replying to atleastisoundknowledgable...:
ALISK
By atleastisoundknowledgable...
30th Jul 2021 16:26

Appreciate that didn’t help one iota.

Thanks (0)
Replying to atleastisoundknowledgable...:
Avatar
By I'msorryIhaven'taclue
30th Jul 2021 16:31

Well at least it sounded knowledgeable ;-)

Thanks (2)
Replying to I'msorryIhaven'taclue:
ALISK
By atleastisoundknowledgable...
30th Jul 2021 18:21

I'msorryIhaven'taclue wrote:

Well at least it sounded knowledgeable ;-)

;) busted.

Thanks (0)
avatar
By paul.benny
30th Jul 2021 16:45

FRS102 requires disclosure of related party transactions and balances. Another company controlled by director is a related party.

The requirement is omitted from FRS105 but may be appropriate still to disclose - and hey it's information that's a little bit useful to the director.

Thanks (3)
avatar
By Paul Crowley
30th Jul 2021 19:33

All that matters is that the balances agree
Easier to see if left as a single balance on both companies

Split it up and the visible logic is gone

Keep it simple so that director can understand what he is signing

Thanks (2)
avatar
By Winnie Wiggleroom
30th Jul 2021 20:58

it is a related party transaction but lets face it no one is ever going to either notice or care apart from you

Thanks (2)
Replying to Winnie Wiggleroom:
avatar
By Hugo Fair
30th Jul 2021 21:11

... unless something goes wrong and one of the companies ends up with creditors that the owner wants to abandon?

Thanks (1)
Replying to Winnie Wiggleroom:
avatar
By Tax Dragon
31st Jul 2021 07:45

Have you gone off doing accountancy, Winnie?

Thanks (0)
Share this content