consolidated accounts - unit 31

I am really struggling with the consolidated accounts questions of AWS part 1 (unit 31), and keep getting it wrong. Could someone please give me a worked example, as the Kaplan book doesn't seem to help here/
Specifically, if company A buys goods and sells to Company B, then presumably this figure should be included in company A’s “goods purchased from external suppliers” as company B can’t include it there (as it is not from an external supplier).
If you could let me have a few worked examples, it would be a big help.
Thanks
Specifically, if company A buys goods and sells to Company B, then presumably this figure should be included in company A’s “goods purchased from external suppliers” as company B can’t include it there (as it is not from an external supplier).
If you could let me have a few worked examples, it would be a big help.
Thanks
0
Comments
If A buys from B and some of the debt is not settles then durring the consolidation the receivables (Debtors) and payables(creditors) are reduced by this amount.
If there has been a trade between the companies so a sold to b at a profit. A has paid B but not all the goods have been sold. There there is an unrealised intercompany profit. As we are consolidating accounts then this unrealised profit must be elimated.
So If A sells to B goods which cost A 10,000 to B for 15,000 then th £5000 is profit. If B sells all the good then this is fine no adjustment is required. If B doesnt sell any of the goods then there is £5000 of unrealised profit which must be taken off the consolidated accounts. You would reduced the income statement (P&L) by the Unrealised profit in the cost of sales section, and the inventories (stock) section of the BS gets reduced also by the unrealised profit.
does that help.
I have not got an AWS part in my Unit 31 book
AWS = Accounting Work Skills, which is the official title of unit 31.
Thanks Marga and Pirate for your help