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Note 2
At March 2010 picant’s current account with sander was $3.4 M (debit). This did not agree with equivalent balance in SSander’ books due to some goods in transit invoiced at $1.8M that were sent by picant on 28 march 2010, but had not been received by Sander until after the year end. Picant sold all these goods at cost plus 50%.I saw your revision video but wasn’t getting how to work it out exactly can you explain me with double entry
Which part are you not sure about? The reconciliation of the current accounts or the calculation of the pups?
If Picant reckons Sander owes $3.4m after invoicing the goods on 28 March and …
… these goods were not received by Sander until after the year end …
… then Sander’s records must show that they owed Picant $1.6m and …
… when they receive the goods in transit, they will add the $1.8m to the amount that they owe already and that comes to $3.4m and increase their closing inventory
Now cancel $3.4m receivables against $3.4m payables
So that $1.8 in transit has now been used to increase the intra-group payable and increase the group inventory but, crucially, the current accounts now reconcile at $3.4 and can cancel
(Don’t forget to eliminate the pup from those in transit goods!)
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