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Inter Branch Account

An inter-branch account is a general ledger account that helps to ensure that the balance sheet at the branch level remains balanced. For example, if a client who has a loan at another branch decides to pay at another branch, this transaction involves accounts that are maintained in another branch. To maintain the integrity of the balance sheet, an inter-branch general ledger will be involved.

For example, if a client from branch A pays US $100 principal cash for his/her loan at another branch B, these are the transactions that will be logged:

  1. The US 100 debit entry will be posted to the cash account at Branch B. The corresponding US 100 credit entry will be posted to the inter-branch account.
  2. The US 100 debit entry will be posted to the inter-branch account. The corresponding US 100 credit entry will be posted to the loans to client account at Branch A.

If we consolidate the accounts of branch A and branch B, the balance of the inter-branch account will be zero.

Please Note

The inter-branch general ledger account does not have any branch associated with it. However, on the branch level, the inter-branch account will have a balance if there are inter-branch transactions. When the accounts for the whole organization are consolidated, the inter-branch account will always be zero.