Inter-company transactions and balances, Financial Accounting

INTER-COMPANY TRANSACTIONS AND BALANCES

As the associate company is not consolidated, care should be taken when there are trading transactions and inter-company balances between the investing company and associate company.

The following general approaches should apply:

1) Inter-company sales of inventory and PPE should be ignored and not adjusted for.

2) Incase of unrealized profit on PPE, opening and closing inventories and excess depreciation, then the investing company’s share of these items is not deducted from the group retained profits and also from the investment in associate company appearing in the balance sheet.

If the sale took place in the current year, then the Unrealised profit on PPE and  on closing inventory and excess depreciation are deducted from the investing company share of profit before tax in associate company.

However, if the sale took place in previous financial periods, then the UP on PPE, UP on opening inventory and excess depreciation are deducted from the group retained profits b/d.

NOTE: The accounting treatment is the same  irrespective of the company that made the sale.

3) In the case of inter-company balances, the amount due to or from the associate company will still appear in the final balance sheet as they are not supposed to be cancelled out.

However you may present the amounts due to or from associate company as a separate item from the other receivables or payables.

Posted Date: 12/12/2012 5:21:32 AM | Location : United States







Related Discussions:- Inter-company transactions and balances, Assignment Help, Ask Question on Inter-company transactions and balances, Get Answer, Expert's Help, Inter-company transactions and balances Discussions

Write discussion on Inter-company transactions and balances
Your posts are moderated
Related Questions
how do you figure out to do adjustments

Joe Doyle has recently received a substantial inheritance on the death of his mother. Joe has been working in a job that he does not really enjoy, and has dreamed of starting up hi

Q. Which of the following is not true of a corporation? a. It may buy, own, and sell property. b. It may sue and be sued. c. The acts of its owners bind the corporation. d. It may

i need help with my project

Arnot International's bonds have a present market price of $1,250. The bonds have an 11% annual coupon payment, a $1,000 face value, and 10 years left until maturity. The bonds may

Illustration of consolidated cashflow statements The voice of the Nation Limited is a Nairobi based media company. Its Consolidated Income Statement for the year ended 30 April

Question : Financial analysts will use ratios to compare performance of companies in the same industry. Lenders will frequently use ratio analysis to help them decide whethe

Explain the term- Not-for-profit organisations There are many organisations that don't exist mainly for the pursuit of profit. Instance include: ?charities ?clubs and ass