Realised and Unrealised profits

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carole paull
carole paull Registered Posts: 1 New contributor 🐸
in AAT Level 4 (Level 8 in Scotland)
Hi
I am just going through some consolidated accounts and realise that I have not got my head around realised and unrealised profits.
Can anyone advise how they are treated in the accounts please.
Thanks

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  • number cruncher
    number cruncher Registered Posts: 2 New contributor 🐸
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    I wish I could!!

    All I remember off the top of my head is that they are concerning inter-company transfers. I think I need to study as much or more than you!
  • visha
    visha Registered Posts: 218 Dedicated contributor 🦉
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    Income Statement Consolidation

    Unrealised profits should be deducted from the closing stock, however if you are dealing with Cost of goods sold then it should be added to COGS.

    You need to do this beacuse you can not make profit from your self. If a parent company sold goods to it's subsiduary and if those goods are not sold then that profit in the selling price is not realised and therefore the profit needs to come down.

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