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
PCAOB - Public Corporation Accounting Oversight Board, a private-sector, non-profit corporation created by Sarbanes-Oxley Act of 2002, to oversee AUDITORs of public companies in or

Q. Risk and Return - issue of debt? Raising debt finance will raise the gearing and the financial risk of the company while raising equity finance will lower gearing and financ

t account for equipment beg, bal 80,000 disposal 22,000 acquisition-41,000 end bal. 99,600 acct. depreciation equip. disposa; 8,500 beg, bal 41,500

a. Create a worksheet in your excel file and name it "Part A Q2". In column A to E set up general journal and input the necessary journal entries to record the transactions and eve

BREACH OF TRUST Remedies available to beneficiary: Injunction, Personal action, Criminal liability. Defence of trusts: He may be relieved from liability if, in the opini

1. An organization owes £300,000 tax at 1.7.X4 and £450,000 at 30.6.X5. Its income statement for the year to 30.6.X5 includes a tax charge of £400,000. How much tax was actually pa

In February, one of Team Shirts' best customers went bankrupt owing team shirts $85. Team shirts uses the sales method for estimating bad debts. February sales were $15,000. The ac

Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4

Q. What are Junk Bonds? Junk Bonds - DEBT SECURITIES issued by companies with higher than normal credit risk. Considered ‘non-investment grade' bonds, these SECURITIES ordinari

Assets                                                       2011                                                                        2010 Non Current Assets