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Hi sir, my qn is… when removing unrealized profits from the retained earnings and closing inventory, why do we remove only a percentage of those goods that are unsold? why not remove all of the profit, since we sold all the goods and obtained a full profit
Provided the goods transferred have all then been sold externally then all the profit will have been realised.
It is only those goods which are still in inventory (and therefore have not been sold externally) for which the group has not realised the profit.
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