Unrealized profit on closing inventory , Financial Accounting

UNREALIZED PROFIT ON CLOSING INVENTORY

Where one company has bought goods from another company in the group and part of these goods are included in the closing inventory, then the selling company is reporting an unrealized profit.

An entry is thus required to reverse the unrealized profit and the overstatement in closing inventory.

The following situation will apply:

a) If the holding company made the sale,
          DR.  Group retained profits
                CR. Group closing inventory

(with the full unrealized profits).

b) If Subsidiary company made the sale:
     DR.  Group retained profits (with holding company share of UP)
     DR.    Minority Interest (With minority Interest share of U.P)
                CR. Group closing inventory (with the full UP)


Note:

Where the subsidiary is company makes the sale, its profits are overstated with the unrealized profit and the subsidiary’s profit belong to both holding company and minority interest. Therefore the reversal of the unrealized profit in the situation will also affect the Minority interest.

Posted Date: 12/12/2012 2:50:08 AM | Location : United States







Related Discussions:- Unrealized profit on closing inventory , Assignment Help, Ask Question on Unrealized profit on closing inventory , Get Answer, Expert's Help, Unrealized profit on closing inventory Discussions

Write discussion on Unrealized profit on closing inventory
Your posts are moderated
Related Questions
The price stages are that at which sellers recruit securities to borrowers.

Which of the following events would be recorded as an accounting event? Answer   a. A guest purchases a meal in a food outlet.


Continuing growth of the company has required that we issue the company's corporate debt soon. As you know, in 6 months we plan to issue $10 million worth of 20-year corporate bond

The Federal Government The Federal Government is the single largest influence on the U.S. economy. There are two main areas in which the government can impact the economy: fi

The conflicting interests of users We have seen above that every user group looks at a business from a different perspective and has its own individual interests. This means th

Your mother-in-law is fretting about paying her mortgage. She refinanced her mortgage loan a while back, and now is thinking about refinancing again. You are going to help her eval

Business start up accounting transactions: Jane Whitfield, a sole proprietor, established the JW Flower Shop on January 2, 2010. The following transactions have occurred during

Q. What are the financial statements? Significant Accounts - An account is significant if there is more than a remote likelihood that account could include misstatements which

Motivation is said to be an internal state that energises an individual to engage in certain types of behaviours. This process is triggered when the individual experiences certain