Borrowing intercompany labour

[Numbers]

Can someone please shed some light on what accounts would be affected if say Company A were to borrow labour worth £5000.00 from Company B?

Would for instance company A DR their liabilities and CR their revenue as costs are increasing and so is revenue? Does the opposite affect then apply to company B?

Any help is much appreciated,

Numbers

[hariharm]

Hi Numbers,

In your example, Company A borrowed labour worth GBP 5,000 from Company B (and from the heading I assume you are saying it's a related entity).
The initial entries would be:
Company A: DR cost/Expense 5000
CR Due to Company B 5000

Company B: DR Due from company A 5000
CR Revenue 5000 (if it is in the business of supplying labour)

OR CR Cost/Expense (in other cases)

If company B credited Revenue, then a consolidation adjustment needs to be made:

DR Revenue 5,000
CR Cost/Expense 5,000


If the due to/due from balance is still outstanding at year end, another consolidation adjustment would be:

DR Intercompany liability 5,000
CR Intercompany Receivable 5,000


Hope this helps.