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
Prepare a cash budget The following information appeared on the balance sheet of XYZ Ltd at 30 June 2012:                              Accounts receivable

1.) Assume a $1000 face value bond has a coupon rate of 8.5 percent, pays interest semi-annually, and has an eight-year life. If investors are willing to accept a 10.25 percent rat

Right of indemnity If the Official Receiver or trustee has seized or disposed of any property in the possession of the debtor, without notice or claim relating thereto, he is


Agreements to settle property The trustee is not bound by such an agreement if it remains executory. If property has already been settled, the trustee can recover it unless it

Cleaning Co. began business on March 1, 2011. The company provides specialized cleaning services to corporate clients. Listed below are the transactions entered into by Cleaning Co

The following information is for the third quarter of this year:   Planned Actual   Production 92,000 units

Prepare a master budget You have just been hired as a new management trainee by XYZ Limited, a distributor of earrings to various retail outlets located in shopping malls acro

please help me on the current lay out of the departmental accounts

1. From your review of note 3.7, how does the company determine whether a sale has occurred? 2. Using the consolidated income statement and consolidated statement of financial p