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Kindly clarify the my doubt with respect to the consolidation:-
Period :- 1/1/2016 To 31/12/2016
P holds 80% of S.. P invoiced and dispatched goods costing 80,000 to S for invoice amount 100,000 on 4/1/2017 and not recorded this trxn as of 31/12/2016. So what should be the treatment for this to find out the sales and cost of sales?As per my understanding sales should be (P-sales + S sales-100,000) and cost of sales no deduction required as purchase is not recorded ie. (P-cost of sales + S cost of sales).
But in one text (BPP) it is calculated as (P-cost of sales+S cost of sales-100,000+20000) which I could not understand the explanation given.
Kindly give me clarify me if I am wrong..
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Please, you correct me if I am wrong!!
I see no need for any adjustment! The purchase of the goods is recorded in P cost of ales
Then along comes the year-end and the goods are still in P inventory (correctly!)
So … no correction necessary
OK?
Disagree… Because consolidated sales has to be lowered to the extend of 100,000/- .
After posting the question I once more reviewed the issue and found the following Logic:
Treat it as the reversal of trxn in P’ books and so sales (100,000) has to be lowered and cost of sales is to be lowered to the extend of the of COST (ie. 80000) and so remaining 20000 which is UNRELEASED PROFIT will be automatically adjusted..
Is it correct Sir ?
“P holds 80% of S.. P invoiced and dispatched goods costing 80,000 to S for invoice amount 100,000 on 4/1/2017 and not recorded this trxn as of 31/12/2016”
It’s an after date sale to the subsidiary! It wasn’t recorded in the financial year in question
It does not fall to be treated as an error
I’m distinctly unhappy with your proposes solution!
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