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Dear sir, I have trouble to understand the intra transaction in the Picant question (June 2010). It’s a good in transit of 1.8 million & Picant current account with Sander was 3.4m :
Debit inventory of 1.8
Credit payable of 1.8
Minus the whole 3.4 from the receivables.It’s not registering in my head because I was thought a way in school:
The lecturer states that you only look at the parent books if the parent is P a payables (P sells goods to S) then we debit GIT OR CIT and credit the payables account and if it’s a receivable we do the reverse I applied this concept and of course it’s not matching to the answer of Picant. It’s frustrating because I can’t afford to make simple mistakes like these.Hiya, your explanation is a bit confusing to me, so no wonder you’re confused as well!
Here’s the way I remember it:
For GIT/CIT, you only adjust the books of the ‘receiving’ company i.e. company who would receive the cash payment or goods being sold. There is no need to adjust the books for the company who sold the goods/made the payment as they have already recorded the transaction which is why the in-transit difference exists in the first place!Hope this makes more sense to you 🙂
“The lecturer states ………” that wasn’t me! I never said that. Watch the free lecture and follow the course notes as they explain how to deal with in-transit cash and goods
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