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When the dividend is received the parent records it by:
Dr. Bank
Cr. Investment in AssociateThe logic behind crediting the investment in associate is that the net assets of the associate decrease when it pays out dividends(dividends are paid out from profits).
So the parent debits investment in associate with its share of profit because its a increase in the net assets, and credits dividend because its a decrease in net assets.and in the consolidated accounts, the dividend from the associate company is NOT included as income. Instead, the consolidated accounts show the group’s share of the associate’s profit after tax. This amount is shown as a PRE-TAX income
Consolidated Accounts:
Do you mean that dividends from associates will not be part of consolidated profit and loss?
Does that mean we need to eliminate the dividend income from consolidated p/l ? How?
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Is it possible to confirm the adjustment upon consolidation then?
Let us assume the dividend is current in the parents individual P&L and in Cash.
Should it go from P&L (i.e. investment income) to Investment in Associate? I.e. Dr Investment income, Cr Investment in Associate?
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