Cash in transit
In a consolidation exercise, reconcile the two entities’ records and make appropriate adjustments so the group does not omit the transfer or retain mismatched intragroup balances. The exact journal entries depend on which entity has recorded the payment and the actual facts. A transfer between consolidated entities is internal to the group and is eliminated in consolidated cash-flow presentation.
Worked example
A subsidiary records a $5,000 payment to its parent on 31 December, but the parent records receipt on 2 January. In a consolidation exercise, first reconcile the parent’s receipt and the intragroup balance using the facts, then eliminate the corresponding group balance.
Common mistake
Eliminating mismatched intragroup balances without first accounting for the in-transit payment, or presenting the internal transfer as cash generated from an external customer.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | FR | Direct | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |