RETAINED PROFITS BROUGHT FORWARD-group accounts, Financial Accounting

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RETAINED PROFITS BROUGHT FORWARD

If we recall from the consolidated balance sheet, the group-retained profits should be made up of the holding companies retained profit plus the holding companie’s share of subsidiary companies post acquisition retained profits. The same case applies to computing the retained profits brought forward of the group. The group-retained profits brought forward should be made up of the holding companies retained profit brought forward plus the holding companie’s share of subsidiary companies post acquisition retained profits brought forward.

But we have to make adjustments to the holding companies retained profits brought forward and the subsiairy company’s profits before we get the holding companies sher. The adjustments are for transactions that took place previously that affect the profits of these two companies.

The holding companies retained profits brought forward will therefore be adjusted as follows:

 

£

£

Holding companies retained profit brought forward

 

X

Add: Excess depreciation charged by holding company up to start of the year

 

X

 

 

x

Less : Unraelised profit on opening inventory if holding company had made the sale

x

 

          Goodwill impaired to date (up to the start of the yaer)

x

 

         Unrealised profit on sale of PPE in previous years if holding co. made the sale

x

(x)

Holding companies retained profit b/f  adjusted for conslidation

 

x

 

The subsidiaries profits brought forward will be adjusted as follows before the holding company takes its share:

 

£

£

Subsidiary companies retained profit brought forward

 

X

Add: Excess depreciation charged by subsidiary company up to start of the year

 

X

 

 

x

Less : Unraelised profit on opening inventory if subsidiary company had made the sale

x

 

          Depreciation on Fair value adjustment that should have been charged to date

x

 

         Unrealised profit on sale of PPE in previous years if holding co. made the sale

x

(x)

Subsidiary company’s retained profit b/f

 

x

 


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