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Intra Group transactions: Has anybody got an easy approach to record them?? TIA

Forums › ACCA Forums › ACCA FR Financial Reporting Forums › Intra Group transactions: Has anybody got an easy approach to record them?? TIA

  • This topic has 2 replies, 2 voices, and was last updated 11 years ago by alua.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • May 31, 2014 at 4:16 pm #172137
    alua
    Participant
    • Topics: 28
    • Replies: 37
    • ☆☆

    Hi Guys, hope you are doing well preparing F7. I am not doing so well but keep practicing. I always spend so much time with Intra group transactions, basically the correct DR and CR entries. Dont have a problem calculating PURP but when translating PURP, CIT and IG balances I got quite confused. Anybody can help here??

    Many Thanks and
    Good Luck!!

    May 31, 2014 at 5:05 pm #172157
    Ruby
    Member
    • Topics: 4
    • Replies: 46
    • ☆☆

    Hi Alua, for intra company transactions and unrealised profit, basically you just need to understand the logic, then it wont be so confusing with double entries.

    For example: intra group balance need to be eliminated when doing consolidation, the difference will be due to cash in transit or good in transit. Cash in transit will be added to cash/bank and good in transit will be added back to inventory in consolidation.
    Eg: Balance in P: 4000 (Dr, which is receivable)
    Balance in S : 3000 (Cr – payable to P)
    The different of 1000 is due to cash in transit.
    So when doing intra group balance concilation: deduct group receivable the whole 4000, add back 1000 CIT and deduct group payable 3000
    => Dr. Payable 3000
    Dr Bank. 1000
    Cr Receivable. 4000

    In case of the different due to goods in transit (same as above, just the 1000 difference due to GIT will be added to closing inventory, so actually account payable of S has to be 4,000
    => to eliminate intra-balance:
    DR. AP 4000
    CR. AR 4000

    1,000 added back to inventory, hence reduce cost of goods sold (if preparing SOCI)
    DR. Inventory 1000
    CR COGS 10000

    Now come to unre profit: eg out of 1000 inventory remained unsold in S, 200 are URP ((P mark up 25%). So actually, the cost of those inventory TO THE GROUP is only 800, but now included in S as 1000, so inventory is overstated by 200 – the amount of URP. so the closing inventory of the group need to be reduced by this, as a result cost of good sold will be increased by this amount
    Dr. COGS 200
    CR. closing inventory 200

    I hope you find this easier to understand.

    May 31, 2014 at 8:30 pm #172220
    alua
    Participant
    • Topics: 28
    • Replies: 37
    • ☆☆

    Yes, thats great Thank you!!

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