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Premier had a trade payable balance owing to sanford of 350000 as at 30 september 20X0. This did not agree with the corresponding receivable in sanford’s books due to a 130000 payment made to sanford, which sanford has not yet recorded.
What I did was Debit cash 130000 Credit receivables 130000 Debit Trade payables 220000 Credit receivables 220000 but why is this incorrectWhy did you head up the post as ‘subsidiary’, because there is nothing in the question as you have typed it to suggest that there is any subsidiary.
If Sanford has not recorded the payment, then Sanford should record the payment, which means they should credit cash and debit payables.
Receivables have nothing to do with it!
(And this is so unlikely to be asked in Paper FA – it is a financial accounting exam and not a bookkeeping exam. There are never many questions asking for double entries!)
Premier acquired 80% if the equity share capital of sanford. So sanford is the subsidiary.
why would it be credit cash and debit payables for sanford whilst sanford is the receiving company
When consolidating the trade receivables and trade payables how would the above information be accounted for.
What I did was Debit cash 130000 Credit receivables 130000 Debit Trade payables 220000 Credit receivables 220000 but why is this incorrect
Sorry – I misread your previous post and thought it was a payment from Stanford In fact it is a payment to Stanford and so you are correct in debiting cash and crediting receivables in Stanfords books.
There is no other entry to be made in Stanfords books.
Now that you have written that Stanford is a subsidiary of Premier, I presume that you are asking about the effect in the consolidated accounts. There are no double entries in the consolidated accounts, and this is now cash in transit which is not examinable in Paper FA.
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