Cons Income Statement
jewels.p
Registered Posts: 1,774 Beyond epic contributor 🧙♂️
I have been concentrating on mastering the Cons SOFP but now am trying to remember everything for Cons Income Statement.
Can anyone help me with this example.
Smith(parent) sold Flowers(sub) goods for £20,000 making a profit of £5,000. These goods were all sold by Flowers before the year end.
It says in the answer that you deduct £20,000 from Smiths Revenue and £20,000 from Flowers C.O.S but do you need to do anything with the £5,000 profit?
Can anyone help me with this example.
Smith(parent) sold Flowers(sub) goods for £20,000 making a profit of £5,000. These goods were all sold by Flowers before the year end.
It says in the answer that you deduct £20,000 from Smiths Revenue and £20,000 from Flowers C.O.S but do you need to do anything with the £5,000 profit?
0
Comments
-
only if there is any unsold stock at year end.
if there is, ie all unsold, add 5k to the COS of the selling co.0 -
Think of it as 2 seperate jobs;
1: You have to remove inter company sales. Or else the group will record the sale of the same item twice in its group accounts. Thats why you have to deduct the 20k from both sales and cost of sales, whether or not the stock remains unsold.
2: Remove profit from unsold items. Or else the group is making a profit from selling stuff from itself, which from a group point of view has not been sold to a customer. So, no profit element can be recognised until its sold out of the group.
Hope this helps, it is a tricky adj to get your head around!0 -
So what entries would I need if only half the goods were sold?0
-
Half the goods sold, would mean 2500 of the profit is unrealised (should not be recognised by the group).
So an additional adjustment would need to be made by increasing COS by 2500 in the consolidation.
ps the other entry credit, would go to stock, reducing the balance which would be overstated by 2500.0 -
Upped this cause I got confused again. Am I right in thinking any unrealised profit gets added back to COS cause I have just looked at my Osbourne Book and in their example it deducts the unrealised profit from closing inventories in COS. I thought I understood CIS but not now!0
-
If you deduct a figure from closing inventories, this increases cost of sales.0
-
http://forums.aat.org.uk/showthread.php?t=27167&highlight=consolidated+income
Somewhere on page one of this thread, I made some comments on it, does that help at all?0 -
-
http://forums.aat.org.uk/showthread.php?t=27167&highlight=consolidated+income
Somewhere on page one of this thread, I made some comments on it, does that help at all?
Yes thanks Rinske. I dont mind if we get a Cons Income Statement I just hope there is no unrealised profit figure to adjust for cause I will prob get myself all mixed up!0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 325 NEW! Qualifications 2022
- 160 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 95 AAT Level 4 Diploma in Professional Accounting
- 8.8K For accounting professionals
- 23 coronavirus (Covid-19)
- 273 VAT
- 92 Software
- 274 Tax
- 138 Bookkeeping
- 7.2K General accounting discussion
- 202 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership