Managing Internal Payments: How Do You Handle Invoices Across Divisions Using One Bank Account?

What will be the entry for the below-mentioned situation?

Our company is a transport company. We give equipment on rent. In our company, we have 3 divisions:

1) Spare Parts
2) Workshop Division
3) Transport Division

We usually use our own spare parts for our vehicles, and they issue cash invoices for those parts. However, the workshop division does not pay them cash; instead, they forward the invoices to the accounts department.

Can anybody tell me how this payment will be made to the spare parts division since we are using one bank account for all three divisions?

Workshop Division Dr. to Spare Part Division

(Personal accounting rule - Debit the receiver and credit the giver. Here, the Workshop Division is the receiver and the Spare Part Division is the giver.)

Hi Zahid,

By considering the details provided by you, I've created some sample data and passed entries in Tally. Please check the attachments - the Word document contains sample transactions, Assets, and Liabilities. All Excel sheets are reports generated from Tally including the Day Book, Trial Balance, Profit and Loss account, and Balance Sheet.

Note: Passed entries are only for your Transportation Division.

Thank you.

Well done Bindhu bro. Very well done. Can you also brief these spare parts entries and workshop division entries separately, showing their profit and loss and balance sheet for both divisions? In the end, these three divisions should be merged to produce one Profit and Loss Account and one Balance Sheet.

Once again, you did a very good job. Thank you very much.

Zahid,

I've passed entries for the Spare Part Division and am sending the reports for only the Spare Part Division, as well as combined reports for the Transportation Division and Spare Part Division. If passing entries for the workshop division and generating a report is useful for you, just let me know, and I'll do it tomorrow and send it to you.