- December 25, 2021 at 7:14 pm #644817alawi sayedParticipant
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I want to understand one of the steps of treating the goods in transit the last bit is to remove the payable and receivable balance between the parent and subsidiary,
But here there is some confusion regarding which balance we have to reverse .Is it the goods in transit sales price or the balance which will be given in the question about the difference between the payable in one side(e.g parent) and the receivable in the other side(e.g .subsidiary).
That’s really making a tricky situation to me,
Thanks,December 27, 2021 at 8:07 pm #644923P2-D2Keymaster
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Goods in transit can be a tricky one, so don’t let it cause you too much worry. There will be plenty of other aspects within the question that you can focus on to secure the marks required.
If it does arise then the steps would firstly be to record the inventory (effectively) as a credit purchase, so DR Inventory CR Payables at the amount the goods were sold at. Secondly, you can then remove the intra-group profit DR Retained earnings (seller) CR Inventory before then finally adjusting for the outstanding intra-group balance. To do this you remove the receivable and payable based on the amount the goods were sold for.
There might be additional information in the question about other outstanding balances that makes the question tricky but what I’ve explained above deals with the fundamentals required.
Attempt a question where you see it and then let me know where you’re struggling and I can help you out.
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