Inter company balances-group accounts, Financial Accounting

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Inter Company balances

One of the companies may appear as receivable (debtor) or payable (creditor) in the other company’s books. Just like in accounting four branches, such inter-company balances should be excluded from the consolidated balance sheet.

The following situations may therefore apply:

a) If the inter-company balances are directly opposite and equal ie a receivable in one companies books is the same as the payable in the other company books and these amounts are included in the receivables and payables of the group.

DR.  Group accounts payables
       CR. Group accounts receivable

(with the full amount due from one company to the other)

If the amounts due from one to the other are shown as separate amounts referred to as current accounts then the amounts or balances are simply ignored and not included in the consolidated balance sheet.

b) If the inter-company balances are directly opposite but not equal then the first step will be: To make them equal by adjusting the holding companys balances.


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