Paying one branch's expense from another branch's bank — how is the entry made?
The case: a company with several branches, each with its own bank account. Branch B incurred an expense, but it was paid from Branch A's bank. The answer depends on one thing: do the branches keep separate books, or a single general ledger? We'll show both methods with their entries, plus the settlement entry — and one core rule: the expense is always charged to the benefiting branch, not the paying one.
① One ledger + a branch dimension — a single entry
If your system runs on one ledger and every journal line carries its branch, this case is recorded in a single entry: the expense line on the benefiting branch, the bank line on the paying branch. No reciprocal accounts at all.
A single entry — each line with its own branch
Dr. Expense [Branch B] 10,000
Cr. Bank – Branch A [Branch A] 10,000
The expense appears in Branch B's income statement (the one that actually benefited), and cash decreases in Branch A's bank (the one that actually paid) — and the entry balances at company level.
② Separate books per branch — two entries via the branch current account
If each branch keeps independent books, you need a reciprocal account linking the two ledgers — that's the role of the branch current account:
In Branch A's books (the payer)
Dr. Branch B current 10,000
Cr. Bank – Branch A 10,000
In Branch B's books (the beneficiary)
Dr. Expense 10,000
Cr. Branch A current 10,000
Note the two accounts mirror each other: “Branch B current” debited at A = “Branch A current” credited at B. And if branches don't transact directly, the entry is routed through the head office across three sets of books (see the FAQ below).
③ The settlement entry — when Branch B repays Branch A
In Branch B's books (when it repays)
Dr. Branch A current 10,000
Cr. Bank – Branch B 10,000
In Branch A's books (when it receives)
Dr. Bank – Branch A 10,000
Cr. Branch B current 10,000
This closes the reciprocal account back to zero. And if the branch won't repay (HQ absorbs it), it's settled against the head office instead of being left open.
A subtle point many people miss
In method ①, the entry balances at company level — but its two sides carry different branches. The result: each branch's income statement stays perfectly correct (the expense sits on the benefiting branch), but if you request a standalone balance sheet for a single branch, it won't balance by the cross-branch amount. If you need a per-branch balance sheet that balances on its own, use an inter-branch clearing account (method ②'s logic). Most SMBs manage by branch income statement, with the balance sheet at company level — so method ① is enough for them.
Frequently asked questions
Which method should I use?
If your branches belong to one legal entity and your system runs on a single general ledger, use the single entry — simpler, less error-prone, and no reciprocal accounts to reconcile monthly. But if each branch genuinely keeps separate books (or you need a standalone balance sheet per branch), use the branch current accounts.
What if branches don't transact directly with each other?
In many companies branches deal only with the head office, not with each other. In that case the entry is routed through three sets of books: Branch A (Dr. Head office current — Cr. Bank), HQ (Dr. Branch B current — Cr. Branch A current), and Branch B (Dr. Expense — Cr. Head office current).
Which branch does the expense belong to in reports?
The benefiting branch — Branch B — not the branch that paid. This is a core principle: the expense is charged to the branch that actually benefited, so each branch's income statement reflects its true performance. If you charge it to the paying branch, you penalize one branch and flatter the other.
Does Zemam record this in a single entry?
Yes — in Zemam every journal line carries its own branch, so you can post the expense line to Branch B and the bank line to Branch A within the same entry. And you can filter reports by branch. If your policy requires inter-branch current accounts, you can create them yourself in the chart of accounts and post the second method instead.
Related reading
One entry — each line with its own branch
In Zemam every journal line carries its own branch, so a branch expense paid from another branch's bank is recorded in a single entry — and reports filter by branch. And if your policy requires inter-branch current accounts, you can create them in the chart of accounts.
Note: the entries here are illustrative, for branches of a single legal entity. If the branches are independent legal entities, they are “companies” requiring inter-company current accounts and elimination on consolidation, and transactions between them may carry tax implications. Consult your chartered accountant before adopting a policy in your books.