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General Accounting Discussions: Debit Note

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    • CommentAuthortgm603
    • CommentTimeAug 25th 2009
     
    I would like to ask about Debit Note. My boss has 2 companies :

    Company A & Company B

    Company A Debtor made payment by using credit card , as Company A do not has a credit card machine , so this payment was made using credit card machine of Company B , as such the payment from this Debtor will be credited into the bank account of Company B. During the audit, the auditor requested to prepare a Debit Note for this payment from Company B to Company A.

    My interpretation is Debit Note is issue to increase about of a sales Invoice . Since the credit card payment is actually from Debtor of Company A ( but using credit card machine of company B ) ,why Company B need to prepare DN to Company A ?
    • CommentAuthorArcSine
    • CommentTimeAug 26th 2009
     
    The DN will be a short-lived promissory note, which will temporarily be on A's books as a Note Receivable, and on B's books as a Note Payable. From the auditor's perspective, this will provide a written document to support the transfer of cash from B to A. Auditors don't like to see cash being moved between related companies without some kind of written document explaining the purpose or need behind the transfer.
    Thankful People: tgm603
    • CommentAuthortgm603
    • CommentTimeAug 26th 2009
     
    ArcSine, thank you for your reply , if this credit card payment from Debtor of Company A still not yet transfer to Company A by Company B ?
    • CommentAuthorArcSine
    • CommentTimeAug 27th 2009
     
    Until Co B transfers the cash to Co A, both companies will continue to show this intercompany item on their own balance sheets. Co B will have a "Note Payable to Co A" among its liabilities, and Co A will have "Note Receivable from Co B" on its balance sheet among its assets.

    When the cash is transferred from B to A, it will have the effect of removing these two intercompany receivable / payable items from the balance sheets.
    Thankful People: tgm603
    • CommentAuthortgm603
    • CommentTimeAug 31st 2009
     
    Thank you again ArcSine for your explanation.

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