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Dear tutor,
Hope you are fine.Would you please help me regarding the double entries to record PUP (provision for unrealised profit). I am confused regarding the entries as it seems different books say different methods!
Are the following entries correct ( suppose PUP = 1.000 and parent owns 30% of the associate)In consolidated SoFP :
if parent sells to associate:
Dr RE 3.000
Cr Investment in associate 3.000if associate sells to parent:
Dr RE 3.000
Cr Inventory 3.000In consolidated PL:
In both cases we have to add 3.000 to the Cost of Sale line.Correct ?!!
Thank you in advance for your helpHi,
Yes, the various different materials appear to have different entries and that makes it confusing.
Your adjustments for the SFP are fine but the profit in the SPL is adjusted based upon whoever made the sale. So if it was the parent then we adjust their C’o’S and if it is the associate then we adjust the share of profit of associate.
Thanks
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