Shadowing Practice: Intercompany Loans Explained for Accountants | English for Finance Professionals - Learn English Speaking with Video
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Hi mate, how are you?
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I'm good, and you?
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Yeah, I'm great.
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I've got two things to say to you.
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Firstly, great job yesterday on the barbecue.
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Thanks, it was good.
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And secondly, how much money do I owe you?
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Yep, what did you pay for?
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Well, I paid for the meat.
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Yep, and that was $150.
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You paid for the beers. Which was $70.
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I paid for the salad.
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$15.
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And last week I bought those two wines as well that you didn't pay me for.
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That was $60 and I also loaned you $50.
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Ah yes, you did loan me $50.
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So how much money do I owe you?
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Lucky I'm an accountant and I keep good records.
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To settle our inter-family account, I need to pay you $105.
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Welcome to the channel where each week we'll be examining common situations you're likely to face in the corporate world.
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In today's class, we're diving into the world of intercompany loans.
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So we'll be talking about what an intercompany loan is, some of the common questions you'll be asked and how to answer them,
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as well as the most common problems and how to communicate the solutions.
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Before we jump into the class today, let me tell you about my free weekly newsletter, English for Accountants.
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A common question I receive from my students is how do I study by myself?
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What article should I read?
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What video should I watch?
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What podcast should I listen to?
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So I'm going to take all that hard work away from you, okay?
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All you need to do is register yourself in the link in the description of this video.
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And each Friday, I'm going to be sending you out this newsletter, which will have the new vocabulary you need to know,
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interesting articles, and common mistakes that I see amongst my students.
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I've designed it to take you about 10 to 15 minutes to read,
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just enough time for you to drink your coffee.
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So let's start our first part of the video to understand what an intercompany loan is.
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In large businesses, one company is usually comprised of a group of many smaller companies, just like a family.
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For example, think about the Nestle Group.
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It's a global company with operations in many countries.
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There's Nestle Switzerland, Nestle UK, Nestle Australia and Nestle USA.
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And within those countries, there are more companies like the chocolate company,
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the bottled water company, the coffee company or the baby food company.
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Even though these entities belong to the same group or family, they often do business with each other.
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For instance, instead of borrowing money from a bank, Nestle UK might borrow money from Nestle Switzerland.
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In this case, a loan is created between the two entities.
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Nestle UK will have to pay that money back in in the future
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but it's not only about lending money sometimes one entity might send products
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or provide services to another instead of paying immediately the receiving
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entity agrees to pay it later this also creates a type
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of loan between the two entities this kind of loan is called an intercompany loan
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when a company has many entities that do business with each other it's important to keep track of all those transactions.
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At the end of the month, the finance team must review and reconcile these movements to make sure everything is recorded correctly.
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So the person responsible for reconciling these balances will probably be asked these questions either from their boss or the auditors.
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And that brings us to our second part of the class, common questions you'll be asked.
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So the first one is, what is the origin of this intercompany loan?
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So the person asking wants to know why does this loan exist or what was the first transaction?
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So you can say, in 2002, Entity X sent $5 million to Entity Y.
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Some of the reasons could be fund the purchase of Z company, fund working capital requirements, fund a dividend payment,
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or repay a bank loan.
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So I've highlighted working capital here just to give you the definition.
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Working capital is the cash you use for your day-to-day operations, you know, paying your accounts payable and the money you receive from accounts receivable.
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So the next question they're likely to ask you is, what makes the intercompany loan move.
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Okay.
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And so you could say the main transactions or movements that go through this account are recharges or fees for shared services,
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additional funding, loan repayments, withholding tax, interest charges.
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So I've highlighted their shared service fee.
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So if you don't know what that is, sometimes in business, like the accounting or the IT or legal,
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it's all done and paid for by one entity in the group
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and each month that entity will charge the other entities their portion of
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that service and
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that usually gets done through the intercompany loan next question is what is the other side of the entry
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and that means if there is a transaction
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that affects our loan the person wants to know how does
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it affect the general ledger what other account code does it go to they want to know
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if it's going to the p l or the balance sheet
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if it was an interest charge you could say the other
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side was recognized posted recorded to interest expense in the p l
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if it was for shared service costs you can say the
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other side is shared service costs in the p l it
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was for funding you could say the corresponding entry was cash
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in the balance sheet generally the auditor will ask this question
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what is the interest rate on the loan in this case
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they're asking what percentage we use to calculate interest on the
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loan balance you can say we use an annual interest rate
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of whatever it is it's important to note here we say annual
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or monthly rate as some countries refer to a monthly amount
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and others use an annual amount
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so we need to be very specific here generally the next question is why did you choose that rate
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so often with intercompany loans the rate we use to calculate
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interest is based off the rate your company would pay
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if it borrowed money externally from a bank for example
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if a company in the us sent money to an entity
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in the uk the uk entity would pay an interest rate similar to what the uk entity would pay
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if it borrowed money from a bank
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if this is the case in your business you can say
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this we use an annual rate of you say the rate
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which is the rate we would pay
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if we were to borrow from our bank sometimes your company may have loans with several banks
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that have different rates in this case you generally get the average of them all
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so you could say we use an annual rate of
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which is the average rate we would pay
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if we were to borrow from our banks
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and then the last question is what currency is the loan denominated in okay so that's the word we use denominated
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And you can say the loan is denominated in, and then you just mention the currency, if it's USD, Euro, or pounds.
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And the last part of our class is the common problem.
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So the most obvious one is why doesn't the loan reconcile?
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And if the reason is we reconciled only one side of the transaction, that means that you recorded the entry in one company,
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but you didn't in the other company.
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So the solution could be, It looks like one side of the transaction was recorded, but the counterparty hasn't recorded it yet.
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We need to follow up and post it on their end.
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Here, counterparty means the other company.
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And follow up means when we help someone to remember something, we remind them.
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Another reason for a discrepancy could be the transaction was posted to the wrong account.
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So this is a little bit different to the previous example.
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Here, perhaps we recorded the transactions in both companies, but instead of putting it to intercompany loans, I put it to external loans.
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And so our loan balance doesn't reconcile.
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So we could say the entry was posted to the wrong account.
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We put it to external loans instead of intercompany loans, which is why the reconciliation doesn't match.
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We need to record it and reclassify the transaction.
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Another reason why the loan might not reconcile is because of an adjustment for foreign exchange was not recorded.
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So if we have a loan that is recorded in different currencies,
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we need to do an FX adjustment at the end of the month, depending on what currency the loan is denominated in.
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Okay.
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So the solution here is we haven't made the FX adjustment at the end of the month.
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We'll post it now.
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And our last problem is perhaps the intercompany loan reconciles in aggregate,
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but when you break it down by the counterparty, it does not reconcile.
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So you can say the total balance looks fine, but when we break it down by counterparty, it doesn't match.
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We need to allocate the differences to the correct counterparty.
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So here break it down means to separate into its various components.
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And that concludes our lesson on intercompany loans.
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I hope you enjoyed it.
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If you did, please hit the like button and share with your friends as it helps me grow my channel.
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If there was a question or a problem that I miss, you can ask me by typing in the comment section below and I'll answer it for you.
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Let’s Start with a Real-Life Scenario
The video opens with a casual chat between friends sorting out shared expenses—meat, beers, salads, and even a small loan. This relatable conversation mirrors how intercompany loans work in business: just like family members track who owes what, companies in a group (think Nestle’s global entities) lend money, send products, or provide services to each other, creating "loans" that need careful tracking. It’s a perfect example of how financial English ties to everyday communication!
Useful Chunks & Collocations to Memorize
- "Settle our account" – A common phrase for resolving debts, whether between friends or companies.
- "Keep good records" – Essential for accountants; shows organization in tracking transactions.
- "Borrow money from" – Preferable to "take money from" in professional settings (e.g., "Nestle UK borrows from Nestle Switzerland").
- "Agrees to pay later" – Describes delayed payments that create intercompany loans.
- "Comprised of" – A formal way to say "made up of" (e.g., "A group is comprised of smaller companies").
Your Shadowing Challenge: Practice Like a Pro
Ready to boost your speaking? Try the shadowing technique with the video’s dialogue! Here’s how: Play a 5-second clip of the friends chatting, pause, and repeat it immediately, mimicking the tone and speed. Focus on phrases like "how much money do I owe you?" and "lucky I’m an accountant." For extra practice, use a shadowing app to record yourself and compare it to the original—this works great for IELTS speaking practice too! By shadowing, you’ll master natural rhythm and financial vocabulary in no time. You’ve got this—let’s start shadowing!
Grammar in this video
The structures the speaker uses most, with the exact words from the video:
| Structure | In the video |
|---|---|
| Passive voice be + past participle — the focus is on what happens, not who does it | be asked · is usually comprised · is created |
| Present perfect have/has + past participle — a past action that still matters now | I've designed · I've highlighted · hasn't recorded |
| Relative clauses who / which + clause — extra information about a person or thing | newsletter, which will · loans, which is |
What is the Shadowing Technique?
Shadowing is a science-backed language learning technique originally developed for professional interpreter training and popularized by polyglot Dr. Alexander Arguelles. The method is simple but powerful: you listen to native English audio and immediately repeat it out loud — like a shadow following the speaker with just a 1–2 second delay. Unlike passive listening or grammar drills, shadowing forces your brain and mouth muscles to simultaneously process and reproduce real speech patterns. Research shows it significantly improves pronunciation accuracy, intonation, rhythm, connected speech, listening comprehension, and speaking fluency — making it one of the most effective methods for IELTS Speaking preparation and real-world English communication.