Inter-company transactions and balances, Financial Accounting

Assignment Help:

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.


Related Discussions:- Inter-company transactions and balances

Determine the cost of capital and risk free rate, Instructions: The ...

Instructions: The case should be done in your assigned groups. Hand in a brief write-up not exceeding two pages explaining what was done.   In April 198

Describe what you understand by the term fund accounting, Question: (a)...

Question: (a) ‘Public accounting is often called fund accounting'. Describe what you understand by the term ‘fund accounting'. (b) "What's the difference between nation

Concepts in accounting, J inherited 30000 & decides to open a saloon.1/4/20...

J inherited 30000 & decides to open a saloon.1/4/2016.under jasper.commits 10000 to the business .opens a a/c in the bank as jasper. What will be th capital amount in his books o

Prepare a cash budget, The following information for the six months ended 3...

The following information for the six months ended 31 December 2009 relates to the business of Mr N Morris: a) Opening cash (including bank) balance Rs 1,200 b) Production in unit

What will be the percentage of return on investment, 1. A stock sells for $...

1. A stock sells for $10 a share. you purchase 100 shares for $1000 and after a year, the prices rises to $17.50. What will be the percentage of return on your investment if you bo

Short-term solvency, Example of Short-term Solvency             ...

Example of Short-term Solvency                           Current Ratio = Current Assets / Current Liabilities                                                = 5.38

What do you mean by inflation, Q. What do you mean by Inflation? Predic...

Q. What do you mean by Inflation? Predicts of future inflation of sales prices and variable costs should be prepared Therefore that a nominal NPV evaluation is able to be under

Cost estimation, 1a. Explain why it is the case that the value of intermedi...

1a. Explain why it is the case that the value of intermediate goods produced and sold during the year is not included directly as part of GDP, but the value of intermediate goods p

Internal revenue service (irs), Explain:- Q.1 Explain the ways in which...

Explain:- Q.1 Explain the ways in which the needs of internal and external users of accounting information are the same and different. Q.2 Why is it important for financial sta

Prepare the journal entries to record non-monetary exchange, Moore Corporat...

Moore Corporation follows a policy of a 10% depreciation charge per year on all machinery and a 5% depreciation charge per year on buildings (the corporation uses the nearest full

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd