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Can you please help me understand how to treat unrealised profit. Does it go in the Net assets workings and retained earnings ?
Does it only apply when the parent sells to the sub or when the sub sells to the parent or both.Please help … I am finding it a bit confusing,many thanks .
Hi,
The unrealised profit is removed as a consolidation adjustment when either P sells to S, or when S sells to P. The key to remember with regards to the adjustment is that we adjust the sellers books for any unrealised profit.
P sells to S – DR RE (P is the seller so adjust in (W5)) CR Inventory
S sells P – DR RE (S is the seller so adjust in (W2) at reporting date column) CR Inventory
Thanks
@felicitylite said:
beautifully explainedThanks! I think that’s the first time someone has called one of my explanations beautiful, thank you!
@felicitylite said:
beautifully explainedThanks! I think that’s the first time someone has called one of my explanations beautiful, thank you!
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