For both scenarios, I would suggest setting up a receivable in Company A from Company B, and a payable in Company B to Company A.
For accrual-basis accounting:
- Step 1 - When the expenses are incurred (applies at all times):
- Company A would post debits for their own expenses, a debit to a receivable account from Company B for its expenses, and a credit for the full amount due to the cc liability account. Company B would post debits for its own expenses, and a credit to the payable to Company A.
- Step 2 - When the payment is made (choose one):
- If Company B makes the payment directly to the cc company, Company B books a credit to cash and debit to the payable to Company A. Company A would post a debit to their cc liability account and a credit to their receivable from Company B.
- If Company B makes the payment directly to Company A, Company B books a credit to cash and debit to the payable to Company A. Company A would book a debit to cash and a credit to the receivable from Company B.
- If Company A makes a payment direct to the cc company on behalf of Company B, they would book the payment as they normally would... a debit to the cc liability and a credit to cash, as long as the receivable has already been booked when the expenses were incurred.
For cash-basis accounting (choose one):
- If Company B makes the payment directly to the CC company, Company B books a credit to cash and debit to its expense accounts. Company A would post a debit for its own expenses and a credit to cash for its own payment made direct to the CC company.
- If Company B makes the payment directly to Company A, Company B books a debit to its expenses and a credit to cash. Company A books a debit to cash and a credit to a receivable from Company B.
- If Company A makes a payment on behalf of Company B to the CC company, it would book a credit to cash, debit to its expenses, and a debit to the receivable from Company B.
In the end, the receivable and payable accounts between both companies need to match. If they are ever out of balance, you know that one of the companies missed recording a transaction.
This can get complicated to track if there are partial payments made and payments made on behalf of the other company each month, but the entries above would resolve both scenarios. As long as cc statements and receipts are kept to support business expenses for both companies, and there is a documented agreement between the companies to provide detail of the arrangement in an audit, you should be okay. It's not advisable to have companies sharing accounts like this because of the high risk of error, but it happens all of the time, especially in small businesses that are owned by a single individual.
All of the above debits/credits can be accomplished using various QB functions, or with JE's. In the end, it all provides the same results, but you can get the entries done faster through JE's rather than trying to do multiple functions in QB. Any accountant that knows QB and accounting should know how to do it both ways if they are handling company books and charging for their services.
