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hey.. i have a doubt in the concept of cash and goods in transit..
and how would you deal with it and the way it will be adjusted in CSFP..thanks
please explain with example..
Have you watched the lecture that covers this point?
Please do and then, if you still have a problem, post again
Thanks
yes sir i have watched the video.. still didnt get the concept..
can you please explain again.. ?
thanks
i am doing this question Parentis june 07.. question 177 of kaplan revision kit
in that question point number 3 deals with cash in transit.can u explain that as well..
thanks
Without me looking at the question, I’m going to assume that the amount involved is $500 being sent by the subsidiary to the parent.
The entries are as follows:
Accelerate the cash into the hands of the parent
Dr Cash $500
Cr Receivables (the subsidiary receivable in the parent’s records) $500Now the Current Accounts reconcile so reduce consolidated receivables and consolidated payables by the reconciled amount
On the sofp the consolidated receivables are parent receivables + subsidiary receivables minus $500 minus the reconciled amount
Consolidated cash is parent’s cash + subsidiary cash + $500
Is that better?
The same treatment is applied to inventory in transit ie
Dr Consolidated Inventory on the sofp
Cr Current Account of the company that has sent the inventoryIn the records of the receiving company
Ok?
I don’t have access to June 2007 exams. You’ll need to give me figures for the amount and the receivables, cash and payables balances as well as any information about the unadjusted balances in receivables and payables from the question
Offspring’s trade payables account (in the records of parentis) of $7 million does not agree with the Parentis’s Trade receivable account (in the records of offspring) due to cash in transit of $4 million paid by parentis.
Trade R P 84 O 44
Bank P 0 O 4
Trade P P 130 O 57On the question paper, in the Offspring column, on the sofp, against the line “Cash” write “+ 4m” and in the same column, on the Trade Receivables line write “- 4m”
Now the current accounts reconcile, so cancel the current account balances from Trade Receivables and from Trade Payables.
Trade Receivables line now reads “84 + 44 – 4 – 7” gives a total of 117
Trade Payables line now reads “130 + 37 – 7” gives a total of 160
Cash line now reads “0 + 4 + 4” gives a total of 8
Better?
i understood the trade payables and cash part
but in the trade receivables line why are deducting 7 shouldn’t be 3 (7-4)No, the adjustment for the cash in transit was made in Offspring’s records. That means that the records of Parentis are unaffected by this adjustment and we’re told that the balance in Parentis’ records is 7
Therefore the amount receivable in the Offspring records must have been 11
Ok?
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