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Differences in Inter company balances
i) Cash in transitWhere one company may have sent cash which is yet to be received by the other company as at the end of the financial period and thus irrespective of the company sending the cash, the following entry will be made; DR. Group cash at bank CR. Group accounts receivable/payables.ii) Goods in transitWhereby one company has sent goods that are yet to be received by the other company as at the end of the financial period and in most cases it is assumed that the goods are sent at an inflated price and thus there is an unrealized profit thereof. The relevant entry will be
DR. Group inventory (with the cost of the goods)DR. Group retained profit (with holding company share of unrealized profit)DR. M.J (with M.J’s share of unrealized profit if it is subsidiary company sending goods) CR Group account receivables /payables.iii) Administration expenses
The holding company may have charged the subsidiary company with its share of administration expenses but this amount is yet to be accrued or accounted for by the subsidiary…
The relevant entry will be;
DR. Group retained profits (with holding company share of admin expenses)DR. M.I (with M.I share of admin expenses) CR. Group accounts receivable/payable.
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