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The first question: Plastik had a trade receivable balance owing from Subtrak of $1·2 million as at 30 September 2014. This differed to the equivalent trade payable of Subtrak due to a payment by Subtrak of $400,000 made in September 2014 which did not clear Plastik’s bank account until 4 October 2014. Plastik’s policy for cash timing differences is to adjust the parent’s financial statements.
The second one: Strata Co’s current account balance with Paradigm Co at 31 March 2013 was $2.8, which did not agree with Paradigm Co’s receivable due to a payment of $900000 made by Strata Co on 28 March 2013, which was not receivable by Paradigm Co until 3 April 2013Why the deal with cancel intra-group balance is different. the first one is Dr payable $800,000, Cr receivable $800,000. The second one is Dr payable $2800,000 Cr receivable $2800,000
Hi,
In the first question, the cash in transit has been dealt with (DR Bank $400,000 CR Receivable $400,000) and so the balance remaining on the receivable is $800,000. This is then eliminated against the equivalent payable.
In the second question I’d follow the same principle by dealing with the cash in transit first of $900,000 and then remove the remaining intra-group balance of $1,900,000. The entry that you show for $2,800,000 is not correct.
Thanks
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