What is the difference between branch accounting and inter company accounting?

Definition of 'Branch Accounting'

An accounting system in which separate accounts are maintained for each branch of a corporate entity or organization. The primary objectives of branch accounting are better accountability and control, since profitability and efficiency can be closely tracked at the branch level.

Branch accounting may involve added expenses for an organization in terms of accounting and infrastructure. This is because it may be necessary to appoint branch accountants to ensure accurate financial reporting and compliance with head office procedures and processes.

Definition of ' Intercompany Accounting'

Intercompany accounting is the recording in the financial statement the transactions between branches of the same company. This should comprise of an Intercompany accounts like receivables and payables. The transactions made to or by each other should also be balanced in the ledger.

Branch accounting is used if the branch is a stand alone legal entity with its own budget, P&L statement, and tax records.

Inter-company accounting is used if the corporate and it brache(s) are one legal entity with one budget, P&L statement, and tax records.

Branch accounting is the accounts maintained for the branches of a Company whereas Inter Company accounting means the accounts maintained separately for the other companies owned by the owners of this Company.