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Hi,
Thanks a lot for your very helpful tuition videos…I just have one question which keeps bugging me with regard to an intra-group payment which has not yet been recognised by the receiving entity.
I understand that the payment is still to be recognised as done in the consolidated SOFP, but I cannot figure out why the equivalent amount is added back to cash of the paying entity (in my example it is the parent company). The reason is that I assume the parent company would obviously had known that it made the payment, so the balance shown for cash in its individual accounts, should it not be already updated without requiring adjustments for the consolidated SOFP?
Thank you,
Carmel Farrugia.
Hi Carmel,
Thanks for the kind comment, always much appreciated.
The cash receipt will not have been recorded y the parent as it cannot be recorded until it has been received in the bank account. OK, the parent is likely to know it has been made but until it has been received it won’t have been recorded in the bank account and so we need to make the journal entry. If we don’t record the entry to cash then the group will not have the cash recorded anywhere.
Thanks
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