Goods In transit

“… how do we deal with good in transit? I am solving a consolidation question in which they have added GIT to liabilities. Why is that?”

Because the entity that has not yet received the goods doesn’t know about them and has not recorded them. Wen we have, at the year end, some goods in transit, we accelerate the receipt of those goods into the records of the receiving entity with this entry:

Dr Purchases (thus increasing cost of sales)
Cr Payables

At the same time, inventory is increased in the records of the receiving entity and we reflect that by increasing closing inventory for that entity and that is achieved by:

Increase closing inventory in the cost of sales (thus cancelling that earlier increase from 5 lines higher up this post) …

… and increasing closing inventory on the statement of financial position

“Also in the same question in June 2012, they have subtracted 1200 CIT from parent’s receivables but haven’t deducted this amount from Subsidiary’s Payables? Why is that?”

Because the subsidiary recorded it as paid when they sent the money

“… I have been deducting CIT from both payables and receivables” -no you haven’t – or, at least, you shouldn’t have been!

What you are deducting from receivables and payables is the reconciled balance between the current accounts in the two separate sets of records

Better?