Bookkeeping · Reconciliation & Close · Brief · Pro level
Intercompany due to/due from: two entities, one owner, mirrored accounts
When one owner runs two entities, money moves between them constantly. Due to/from accounts must mirror each other exactly — here is the discipline and the monthly check.
Run two entities — an operating company and the LLC that owns its building, say — and money will leak between them: one pays a bill for the other, staff time gets shared, cash gets loaned in a pinch. Every one of those crossings must land in a pair of mirrored accounts: a due from (asset) on the lending entity's books, and an identical due to (liability) on the borrowing entity's. The controlling rule is unforgiving and simple: at any date, the two balances must be equal and opposite, to the penny.
The mirrored entries
Entity A pays a 1,200.00 insurance bill that belongs to Entity B.
| Account | Debit | Credit |
|---|---|---|
| Due from Entity B | 1,200.00 | |
| Cash | 1,200.00 |
No expense on A's books — this is B's cost. A holds a receivable.
| Account | Debit | Credit |
|---|---|---|
| Insurance expense | 1,200.00 | |
| Due to Entity A | 1,200.00 |
B gets the expense and the liability. Book both entries the same day, ideally in the same sitting — the lag is where mismatches breed.
When B repays, the entries reverse through cash on both sides. Settle in actual cash periodically; balances that only ever grow start to look like disguised capital contributions or distributions rather than genuine loans.
The monthly mirror check
- Run each entity's intercompany account balance as of month-end.
- Compare: due-from on one side must equal due-to on the other.
- If they differ, export both entities' entries for the month and match line by line.
- Book the missing entry where it is missing — dated in the open period, per the close's reopening discipline.
What a mismatch pattern tells you:
| Symptom | Likely cause |
|---|---|
| Difference equals one transaction | One side never booked it |
| Difference divisible by 9 | Transposition on one side — see discrepancy hunting |
| Balances equal but both growing for years | Entries fine; settlement never happens — a substance problem, not an arithmetic one |
| One side nets to zero, other doesn't | One entity nets due to/from in a single account, the other uses two — align the account structures |
Keeping it from sprawling
One pair of accounts per entity relationship — three entities means up to three pairs, each reconciled independently. Never route intercompany flows through owner draw accounts or a shared credit card without booking the mirror. And resist the "we'll sort it out at year-end" ledger: twelve months of unmatched crossings is an afternoon of forensics that a five-minute monthly mirror check would have prevented.
Frequently asked questions
- What are due to and due from accounts?
- Due from is a receivable — money another related entity owes this one; due to is the mirroring payable on the other entity's books. When Entity A pays a bill for Entity B, A records 'due from B' (asset) and B records 'due to A' (liability), for identical amounts. At any date the two balances must be equal and opposite.
- How do I reconcile intercompany accounts between two companies?
- Monthly, run each entity's due to/from balance and compare: A's 'due from B' must equal B's 'due to A' exactly. Differences mean one side recorded a transaction the other missed, or amounts or dates disagree. List each entity's entries side by side, tick matches, and book the missing entry on the side that lacks it.
- Why can't I just pay one company's expenses from the other's account?
- You can, but every such payment must be booked as an intercompany balance on both sets of books — otherwise the paying entity deducts the other's expenses, misstating both returns and undermining the entities' legal separateness. Casual cross-payments without documentation are a classic audit finding and a factor courts weigh in piercing the corporate veil.