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Review Question: A sells goods to P. 40% of the good remained in P inventory at yr end. how will you treat the transaction in the group account?
Me: DR- share of profit in Associate (with P’s share of the PUP)
CR – Group inventory.
According to the lecture note here.BPP’s answer: DR- share of profit in Associate (with P’s share of the PUP)
CR- investment in associate.
they stated that the transaction has no effect on group inventory.Please which one is the correct treatment.?
Thanks for your prompt response.
Another question of the same pattern was treated the same way in Section C. the explanation was that the associate is not a member of the group so their PUP on inventory does not affect group inventory.
Please sir, is this correct? which of the two accounting treatment should I follow in an exam situation?
Thanks for your help.
Hi,
Yes, there is no specific guidance in the standard so technically either was is allowable. It now seems that for this exam we are to go with the simpler, second, method that you mention.
Thanks
Hello Sir,
Please I want to confirm if its allowed to use the proforma format of the consolidated profit & loss in the exam. I noticed the format was not used in BPP review kit.
Sorry I did not want to create another subject heading for this question.
Thanks
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