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“Strata’s current account balance with Paradigm at 31 March 2013 was $2·8 million, which did not agree with Paradigm’s equivalent receivable due to a payment of $900,000 made by Strata on 28 March 2013, which was not received by Paradigm until 3 April 2013.”
“Plastik had a trade receivable balance owing from Subtrak of $1·2 million as at 30 September 2014. This differed to the equivalent trade payable of Subtrak due to a payment by Subtrak of $400,000 made in September 2014 which did not clear Plastik’s bank account until 4 October 2014. Plastik’s policy for cash timing differences is to adjust the parent’s financial statements.”
The treatment for Paradigm is eliminate the $2,800 for inter-co and treat $900 for the CIT.
However, the treatment for Plastik is eliminate the $800 for inter-co and treat balance of $400 as CIT.
The difference is the word of “Current account” and “Trade receivable”, may i ask for the further explanation for this two treatments?
Thank you.
In Strata / Paradigm, the figure of $2,800 is from the records of the entity that has sent the cash in transit
In Plastik / Subtrak, the figure of $1,200 is from the records of the entity that is to receive the cash in transit
I find that the easiest way to deal with this is by opening T accounts – one in each entity (remember, the double entry must stay within each separate entity
Put in the figures you know (normally only one!) Accelerate the cash or goods in transit into the receiving entity records and that should leave you with the balance that agrees with the other entity
Try it!
The use of the expression “Current Account” is not a matter to be concerned about
Say you and I deal with each other. In my records I have a receivable Account in your name (I’ll probably call it the Reno Current Account (or Current Account with Reno, or Reno Receivable Account, or Reno Sales Account, or the Reno Collectibles Account, or the Reno Customer Account, or Reno Trade Receivable Account)
What’s in a name? I could call it the Snow-White and the seven Vertically Challenged People Account so long as I remembered that this is the account I use to record my transactions with you
OK?
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