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Company advance tax

14 June 2023

A & B is my own companies, I have to pay advance to A, due to shortage of funds paid from B company, it is liability or what, pls explain

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B Durga Prasad (Student) (175 Points)
Replied 14 June 2023

When you pay an advance from one of your companies (B) to another of your companies (A) due to a shortage of funds, it creates a transaction between related parties. In this case, the advance payment from B to A would be considered a liability for company B.

As the payment is made as an advance, it represents a debt owed by company A to company B. Company B expects to be repaid by company A in the future. Therefore, the advance payment would be recorded as a liability on the balance sheet of company B until it is repaid.
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