Inter-company transactions and balances, Financial Accounting

Assignment Help:

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.


Related Discussions:- Inter-company transactions and balances

Describe the internal revenue code, Exclusions - Income item that is exclud...

Exclusions - Income item that is excluded from a taxpayer's gross income by INTERNAL REVENUE CODE or an administrative action. Common exclusions comprise gifts, inheritances and de

Transactions affecting retained earnings, shown below in T-account format a...

shown below in T-account format are the changes affecting the retained earnings of Brenner-Jude Corporation during 2011. At January 1,2011, the corporation had outstanding 105 mill

MAKING A PITCH, SAMPLES PITCH FOR AN ACCOUNTING ASSIGNMENTS

SAMPLES PITCH FOR AN ACCOUNTING ASSIGNMENTS

Credit reference agencies and credit scoring, Q. Credit Reference Agencies ...

Q. Credit Reference Agencies and Credit Scoring ? A several organisations example Dun & Bradstreet and Standard & Poor provide credit scores and ratings for companies. These ma

Unrealized profit on property, Unrealized profit on Property, Plant and Equ...

Unrealized profit on Property, Plant and Equipment Where one company sells an item of PPE  to the other company in the group then, this will lead to two main problems. a) The se

Absorption costing, Absorption costing is a cost accounting method that ...

Absorption costing is a cost accounting method that tries to charge all direct costs and all production costs of an organization to specific units of pr

Light-gauge aluminum, Tampa Foundry began operations during the present yea...

Tampa Foundry began operations during the present year, manufacturing several products for industrial use. One such product is light-gauge aluminum, which the company sells for $36

Rules of intestacy-no spouse and no children, The intestate leaves no spous...

The intestate leaves no spouse and no children The net estate devolves as follows: to his Father; or if dead Mother; or if dead Brothers and sisters, and any child o

Calculate tax salvage value , Consider an asset that cost 100000 to acquire...

Consider an asset that cost 100000 to acquire and has an estimated salvage value of 20000. The assets is to be depreciated over four years. At the end of four years, the asset is s

our assumptions about consumer behavior, 5.    A stockholder named Sue mus...

5.    A stockholder named Sue must cast a vote for chair of the board. Sue prefers Mr. Lee to Ms. Doe, Ms. Doe to Mr. James, and Mr. James to Mr. Lee. a. Are Sue's preferences c

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd