Cash in transit

“…so once received paradigm,s receivables balance should be 900,000 less than 2.8m.”

NO! When that $900,000 is received by Paradigm the 2 current accounts will be the same at $2,800,000

So when Paradigm receives that cash in transit, the journal entry will be to:

Dr Cash
Cr Current Account with Strata

Open 2 T accounts, the first is in Paradigm’s records and then the second is in Strata’s records – remember, these are sets of records that are hundreds of miles apart so we’re not looking at double entry between these 2 T accounts

In the Strata records, in the Current Account with Paradigm, we DID have a balance owing of $3,700,000 and then, just before the year end, Strata paid $900,000 and effected the double entry:

Dr Current Account with Paradigm $900,000
Cr Cash $900,000

and, in Strata’s records, that left a balance payable to Paradigm of $2,800,000 (per the question)

But Paradigm hasn’t received this cash but when it IS received, Paradigm will:

Dr Cash $900,000
Cr Current Account with Strata $900,000

and when that entry is put through there will remain a balance receivable from Strata of $2,800,000

So how much did the Paradigm records show BEFORE this adjustment? It must have been $3,700,000 receivable so that, when $900,000 is deducted, it will leave just $2,800,000 receivable

So the adjustments for you to make are:

In Paradigm:

Dr Cash $900,000
Cr Current Account with Strata (Receivables) $900,000

and then cancel the remainder

Reduce group payables $2,800,000
Reduce group receivables $2,800,000

In summary:

Paradigm’s receivables have fallen by $3,700,000
Paradigm’s cash has increased by $900,000, and
Strata’s payables have fallen by $2,800,000

and, from the group perspective

Dr Group Cash $900,000
Dr Group Payables $2,800,000
Cr Group Receivables $3,700,000

Is that OK now?