where to post PUP

Pup on a sale of goods (as distinct from on TNCA transfer):

Calculate the pup and deduct it from the combined inventory figure for the consolidated statement of financial position

The deduction from inventory also has an affect on the consolidated cost of sales but that affect is not one that is instantly intuitively obvious …. we need to ADD the pup to cost of sales

So the double entry is effectively:

Dr Cost of Sales (statement of profit or loss)
Cr Inventory (statement of financial position)

For the purposes of calculating consolidated retained earnings and the nci figures, it’s important that these adjustments are made in the records of the entity that has made the sale ie the entity that has recognized this profit (correctly!) in its own records but, for the purposes of consolidation we need to eliminate the pup

For a pup on TNCA transfer, the pup is calculated as a net figure of profit recognised on the transfer less any depreciation on that mark-up element of the transfer

The adjustment is to reduce the profits and reduce the TNCA … technically it’s:

Dr (typically) Cost of Sales (statement of profit or loss)
Cr TNCA (statement of financial position)

And this net adjustment (pup on transfer less associated depreciation) is made in the records of the transferring entity ie the entity that has (correctly) recognised the profit that now needs to be eliminated for consolidation

OK?