Intercompany Reconciliation: Loans, Recharges and Balances Close File
Intercompany balances are easy to ignore because the counterparty is friendly. Auditors and investors still expect confirmations, agreements and clean ageing.
For broader context, see the NRI, RBI and International Transactions Hub.
Detailed analysis
Intercompany reconciliation combines accounting, related-party disclosure, tax and foreign-exchange issues. Finance should reconcile both sides, confirm balances, review recharges and document settlement plans.
Practical example
Indian parent books ₹25 lakh receivable from subsidiary for shared engineering costs. Subsidiary books ₹21 lakh payable because GST and FX recharges differ. Finance prepares transaction-level bridge and resolves before audit.
Evidence and control checklist
| Area | What to check | Evidence to save |
|---|---|---|
| Entity mapping | Group entities and relationship. | Group structure and related-party master. |
| Transaction listing | Loans, recharges, sales, reimbursements and guarantees. | Intercompany ledger and agreements. |
| Two-sided reconciliation | Balance as per both entities. | Confirmation and difference sheet. |
| FX/tax impact | Foreign currency, withholding, GST/transfer pricing review. | Tax note and FX working. |
| Settlement plan | Payment timeline or board-approved conversion/write-off. | Settlement tracker and approval. |
For the connected rule, example or next step, see Bank Reconciliation Control File: Unmatched Items, Charges and Receipts.
Common mistakes
- Leaving intercompany balances unreconciled for years.
- No agreement for recharge.
- Only one entity records transaction.
- Ignoring FX and tax impact.
- No balance confirmation.
Official reference framework
Based only on official India Code, MCA and ICAI source pages listed below. Check the latest Companies Act, Schedule III, accounting standards, Ind AS/AS applicability and auditor guidance before closing or filing.
Official sources used
This article is intentionally source-limited to official India Code, MCA and ICAI material. Source validation date: 17 June 2026. Verify final positions with latest Companies Act, Schedule III, accounting standards, Ind AS/AS applicability and auditor guidance before closing or filing.
- ICAI: Accounting Standard (AS) 18 Related Party Disclosures
- India Code: Companies Act, 2013 Section 128 - Books of account
- India Code: Schedule III to the Companies Act, 2013
- MCA: Accounting Standard (AS) 11 Effects of Changes in Foreign Exchange Rates
For the connected rule, example or next step, see Loans to Directors and Inter-Corporate Loans: Section 185 vs Section 186.
FAQs
To ensure both entities record the same transaction/balance.
Timing, FX, taxes, missing invoices and recharge logic.
Yes, especially for loans, services and recharges.
Often yes; disclosure and approvals should be reviewed.
Ledger, agreement, confirmation, tax note and settlement plan.
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Business Case Studies & Corporate Strategy
- Official starting point
- www.mca.gov.in