Why inter-entity loans drift apart in Xero
Each entity in a client group is its own Xero organisation. When the company lends to the family trust, the company records a loan receivable in its file and the trust records a loan payable in its own. Xero doesn’t compare the two. In July 2025 it told users on its ideas forum that consolidated reporting “is not currently planned”.
So the two sides only agree if every transaction reaches both files. In practice, these are the usual reasons they don’t:
- One-sided entries. The company pays the trust’s accounting fees, insurance or rates, and only the company records it. In our experience this is most of the difference on most loans.
- Timing. One side records a transfer on 30 June and the other on 1 July.
- The wrong account or entity. A repayment lands in a different loan account, or in the loan with a sibling entity.
- GST on one side only. One file codes the payment with GST and the other doesn’t, so the amounts differ by the GST.
- Cents. $543.30 in one file and $543.00 in the other.
- Changes after the fact. Someone edits or deletes a transaction in Xero after the loan was last reconciled.
A worked example: one loan, two files, $6,862.60 apart
Bull Antics Pty Ltd lends to the Crazy Bull Family Trust. Both files agreed on 1 July 2026: the trust owed the company $48,215.40. The company keeps one loan account. The trust splits its side across two accounts, funds contributed and drawings, which is common and makes the comparison harder by eye.
Bull Antics Pty Ltd950 Loan - Crazy Bull Family Trust
Crazy Bull Family Trust501/004 and 503/004
| Date | Entry | Bull Antics Pty Ltd | Status | Crazy Bull Family Trust |
|---|---|---|---|---|
| 01/07 | Top up trust | 5,000.00 Dr | In both files | 5,000.00 Cr |
| 08/07 | Accounting fees - tax return | 1,320.00 Dr | Only in Bull Antics | Not recorded |
| 15/07 | Top up trust | 2,500.00 Dr | In both files | 2,500.00 Cr |
| 28/07 | Accounting fees - July | 440.00 Dr | Only in Bull Antics | Not recorded |
| 05/08 | Xero subscription | 78.00 Dr | Only in Bull Antics | Not recorded |
| 12/08 | Repayment from trust | 3,000.00 Cr | In both files | 3,000.00 Dr |
| 20/08 | Landlord insurance | 543.30 Dr | In both files | 543.30 Cr |
| 29/08 | Accounting fees - August | 440.00 Dr | Only in Bull Antics | Not recorded |
| 03/09 | Top up trust | 10,000.00 Dr | In both files | 10,000.00 Cr |
| 15/09 | Accounting fees - financials | 2,860.00 Dr | Only in Bull Antics | Not recorded |
| 26/09 | Accounting fees - September | 440.00 Dr | Only in Bull Antics | Not recorded |
| 30/09 | Council rates | 1,284.60 Dr | Only in Bull Antics | Not recorded |
- Bull Antics says the trust owes
- $70,121.30
- The trust says it owes
- $63,258.70
- Difference: the 7 entries in one file only
- $6,862.60
Five transactions appear in both files: three top-ups, a repayment and an insurance premium. They cancel out. The other seven appear only in the company’s file. Five are accounting fees the company paid for the trust, one is a Xero subscription and one is a council rates notice.
Add the seven and you get $6,862.60, which is exactly the gap between the two balances. That’s the test of a finished reconciliation: the difference is fully explained by entries you can name.
How to reconcile an inter-entity loan, step by step
Pick a start date both files agree on.
Usually the last date the loan was reconciled, or the start of the financial year. If the opening balances don’t agree, fix that first; reconciling forward from a wrong opening balance just moves the problem.
Put both sides together for the same date range.
Include every account that carries the loan on each side. A trust that splits the loan across funds contributed and drawings needs both accounts in the comparison.
Pair the entries that appear in both files.
Match on date and amount first, then on amount alone for transfers that cleared a day apart. Paired entries need no action.
Sort what’s left into groups.
Fees paid on the other entity’s behalf, rates, insurance, repayments recorded once. Most one-sided entries fall into a few groups that will be treated the same way.
Post the missing entries in the other file.
One journal per transaction, on the transaction’s own date, so the two ledgers line up entry for entry. Code each journal the way that entity would have coded the original bill.
Clear the near misses.
Post a cents difference as an adjustment, with a narration that says why. Fix a GST difference by correcting the tax code in the file that’s wrong.
Check the closing balances agree, then keep the evidence.
Save the matched list and the journals with the client’s file, so the reviewer and next year’s preparer can see how the balance was reached.
Done monthly or quarterly, each pass covers a few weeks of entries, so the one-sided list stays short. Done once at year end, it becomes the spreadsheet job everyone puts off.
The journals that fix one-sided entries
In the example, the trust needs a journal for each accounting fee the company paid. The trust’s expense goes up, and so does what it owes the company.
| Account | Debit | Credit | Tax |
|---|---|---|---|
| 300 Accounting expense | $1,320.00 | BAS Excluded | |
| 501/004 Funds contributed – Bull Antics Pty Ltd | $1,320.00 | BAS Excluded |
Repeat for each one-sided entry, on its own date. The council rates and the Xero subscription follow the same pattern with their own expense accounts.
What reviewers look for
- A closing balance that agrees in both files, at the same date, to the cent.
- Journals dated on the original transaction date, not all on 30 June.
- No unexplained “balancing” journal for the whole difference. That hides the entries instead of recording them.
- The same GST treatment in both files for the same transaction.
- A note of anything edited in Xero after the last reconciliation.
How AccountKit reconciles inter-entity loans
AccountKit’s inter-entity loan tool does this process across a client group’s Xero files. You choose the accounts on each side of the loan, including several accounts on one side, and the start date.
| Date | Description | Debit | Credit |
|---|---|---|---|
| 01/07/2026 | Top up trust950 Loan - Crazy Bull Family Trust | $ 5,000.00 | - |
| 08/07/2026 | Accounting fees - tax return950 Loan - Crazy Bull Family Trust | $ 1,320.00 | - |
| 15/07/2026 | Top up trust950 Loan - Crazy Bull Family Trust | $ 2,500.00 | - |
| 28/07/2026 | Accounting fees - July950 Loan - Crazy Bull Family Trust | $ 440.00 | - |
| 05/08/2026 | Xero subscription950 Loan - Crazy Bull Family Trust | $ 78.00 | - |
| 12/08/2026 | Repayment from trust950 Loan - Crazy Bull Family Trust | - | $ 3,000.00 |
| 20/08/2026 | Landlord insurance950 Loan - Crazy Bull Family Trust | $ 543.30 | - |
| 29/08/2026 | Accounting fees - August950 Loan - Crazy Bull Family Trust | $ 440.00 | - |
| 03/09/2026 | Top up trust950 Loan - Crazy Bull Family Trust | $ 10,000.00 | - |
| 15/09/2026 | Accounting fees - financials950 Loan - Crazy Bull Family Trust | $ 2,860.00 | - |
| 26/09/2026 | Accounting fees - September950 Loan - Crazy Bull Family Trust | $ 440.00 | - |
| 30/09/2026 | Council rates950 Loan - Crazy Bull Family Trust | $ 1,284.60 | - |
| Date | Description | Debit | Credit |
|---|---|---|---|
| 01/07/2026 | Tfr from company501/004 Funds contributed - Bull Antics Pty Ltd | - | $ 5,000.00 |
| 15/07/2026 | Tfr from company501/004 Funds contributed - Bull Antics Pty Ltd | - | $ 2,500.00 |
| 12/08/2026 | Tfr to company503/004 Drawings - Bull Antics Pty Ltd | $ 3,000.00 | - |
| 20/08/2026 | Insurance paid by company501/004 Funds contributed - Bull Antics Pty Ltd | - | $ 543.30 |
| 03/09/2026 | Tfr from company501/004 Funds contributed - Bull Antics Pty Ltd | - | $ 10,000.00 |
No transactions to reconcileRefresh your Xero data above, or post entries from the other Xero organisation as required.
Illustrative AccountKit Inter-entity loan tool. Sample client group and sample figures, not live ledgers.
- Auto match pairs exact matches first, then entries with the same amount.
- A balancing entry posts small differences such as cents.
- Selected one-sided entries become journals in the other file, one per line on its own date. Code the first and copy that coding to the rest.
- Entries edited or deleted in Xero after reconciling are flagged, and un-reconciling voids the journal AccountKit created.
- A summary shows every loan in the family group in or out of balance at a date you choose, with an export to Excel.
It’s included in the base AccountKit subscription, alongside the client mapping tool for the structure the loans run through. See pricing for the plans.
★★★★★
We just have to say account kit's inter-entity loan tool has saved our sanity. I've reconciled literally hundreds of lines across a larger group where very few of the loan accounts matched. It would have been a nightmare otherwise.
Questions practices ask
Does Xero reconcile intercompany loans automatically?
No. Each entity is a separate Xero organisation, and Xero has said consolidated reporting is not currently planned. The two sides of a loan only agree if every transaction is recorded in both files.
Why don’t my inter-entity loan balances match?
Usually because of one-sided entries: one entity paid something for the other and only one file recorded it. Timing, GST coded on one side only, the wrong account and cents differences are the other common causes.
How often should a practice reconcile inter-entity loans?
Monthly or quarterly. Each pass is quick when the list of one-sided entries is short, and the balance is ready when you prepare the year-end accounts.
Should I post one journal for the whole difference?
No. One journal per missing transaction, on its own date, keeps the two ledgers matching entry for entry and shows the reviewer what the difference was made of.
Is an inter-entity loan a Division 7A loan?
In Australia it can be, if a private company lends to a shareholder or an associate of a shareholder. Whether Division 7A applies depends on the parties and the terms, so check the loan against the ATO’s Division 7A guidance at year end.
Sources
This guide is general information, not advice for a particular client. Check the ATO guidance current at the time you rely on it.
- Xero: multi-entity accounting guide Checked 1 October 2026
- Xero Product Ideas: consolidated reporting across organisations (Xero response, 23 July 2025) Checked 1 October 2026
- ATO: Division 7A loans Checked 1 October 2026
- ATO legal database: Commissioner of Taxation v Bendel Checked 1 October 2026
- AccountKit Help Centre: Inter-Entity Loan Reconciliation Tool Checked 6 October 2026
