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Unit 7 - Help! - Transfers between divisions

anasilviaanasilvia Just JoinedRegistered Posts: 2
I am currently preparing to take my Unit 7 skills test. I am very confused about one thing though: Transfers between divisions.

I understand that when consolidating the accounts you must take out any transfers between divisons, purchases and sales, they must cancel each other out. But how do you treat goods that are in transit?

For example division A sold 100 to division B, but B only recorded 80 because the rest were in transit at year end.

Do you have any ideas or guidence for me?

Comments

  • BluewednesdayBluewednesday Font Of All Knowledge Registered Posts: 1,624
    When goods are in transit, you complete the entries as if they had arrived at year end. The same happens with any cash in transit.

    In your example Co B would include as stock at year end.
  • MerionethMerioneth Settling In Nicely Registered Posts: 21
    hiya

    If your goods in transit between two divisions haven't been received by the other division would you increase your stock figure?

    Then if your doing an consolidated P + L would you put the increase in stock figure in there?

    Thanks

    Liz
  • BluewednesdayBluewednesday Font Of All Knowledge Registered Posts: 1,624
    Yes, I have edited my answer (note to self 'more haste less speed!'), in essence you just complete the entries so you would decrease your cost of sales (as you have increased your stock) in the Income Statement
  • anasilviaanasilvia Just Joined Registered Posts: 2
    Thank you both for your help!
    Ana Silvia
  • jkcjkc Well-Known Registered Posts: 166
    unit 7 help please

    struggling with transfers between divisions I understand that the transfer is added/deducted to closing stock values, but how does it effect purchases. how can transfers be more than purchases.
    the other thing im stuck on is what to include in a transfer report. simulation tonite help!
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