Pedantic

Follow these steps:

1. Write on your question paper the entry for the in-transit items whether it is cash or goods

The entry is going to involve cash and / or goods

The entry is made in the column of figures for the entity that is due to receive the cash / goods … so we pretend that that entity has in fact received the cash / goods before the year end

I’m going to assume that the in-transit item is cash, so the adjustment for you to record on your question paper (and also in your answer booklet) is:

increase the cash balance by the amount of the cash in transit
decrease the receivables balance by that same amount

You may need to make a similar entry for goods in transit but it is only very rarely that the examiner asks a question with both cash and goods in transit

2. Now the intra-group current accounts will balance but here you need to be very careful

A question will tell you the intra-group balance in the records of only one of the entities … but which one!

If the question tells you the balance in the records of the sending entity (the entity that has paid the cash or despatched the goods) then the balance given is the balance to which we are aiming and it’s that figure that will be deducted from both combined receivables and combined payables

If (and this is more likely) the question gives you the balance according to the records of the receiving entity, we have just made an adjustment to that balance haven’t we. We recorded the cash in transit as a deduction from receivables. Yes we did! Look at your question paper!

So assuming a pre-adjustment intra-group receivables balance of $30,000 and cash in transit of $700, we have already written against the receivables total figure in the receiving entity’s column $700

Now we need to deduct from both the receivables and the payables respective combined figures the remaining figure of $29,300

Is that any better?

Incidentally, if the in-transit item is goods, the entry necessary to record those goods in the receiving entity’s records will be:

increase inventory
increase payables

There was once a question where the examiner was just a little bit sneaky and the goods in transit were being returned by the purchasing entity back to the sending entity so, if it were the sending entity that is now receiving these returned goods, the entry would be:

increase inventory
decrease receivables

Better?