GROUP OF COMPANIES - 3

Goods in transit

 

 

Goods in transit relates to goods transferred from one Group Company to another that are

 

still in transit as at the Balance Sheet date.

 

In such situation, the goods in transit must be recorded into the transferee company before

 

carrying out the inter-company balances elimination.

 

 

 

 

Examples of the adjustment

 

 

Dr. Stock Account

 

Cr. Transferor Account

 

 

 

 

Unrealised profits on unsold goods

 

 

This refers to goods transferred from one group of company to another at a profit of which

 

are unsold to a third party at the end of the financial year.

 

This unrealised profit must be eliminated. This is because such profit is not realised yet so

 

long as it remains in the group of companies. Therefore, the adjustment to eliminate the

 

unrealised profit is essential

The adjustment will eliminate the inflated consolidated retained earnings and inflated

 

consolidated closing stock.

 

 

 

 

 

 

Unrealised profit for goods transferred to subsidiary company

 

 

This means the unrealised profit is shown in the books of the parent company.

 

The retained earnings of the parent company must be reduced by the unrealised profit.

 

The consolidated stock figure should also be reduced by the unrealised profit portion.

 

 

 

Dr. Consolidated retained earnings

 

Cr. Consolidated stock

 

 

 

 

Unrealised profit for goods transferred to the parent company

 

 

This means the unrealised profit is shown in the books of the subsidiary company.

 

The relationships of the subsidiary company must be reduced by the unrealised profit.

 

The consolidated stock figure should also be reduced by the unrealised profit portion.

Dr. Consolidated retained earnings

 

Dr. Non-controlling Interest (formerly known as minority interest)

 

Cr. Consolidated Stock