SBRINT
Syllabus D. Financial Statements of Groups entities D1. Group Accounting

D1g. Intra-Group Balances & In-transit Items 15 / 35

Syllabus D1g)

Determine and apply appropriate procedures to be used in preparing consolidated financial statements.

Inter-Group Company Balances

As with Unrealised Profit - this occurs because group companies are considered to be the same entity in the group accounts.

Therefore you cannot owe or be owed by yourself.

So if P owes S - it means P has a payable with S, and S has a receivable from P in their INDIVIDUAL accounts.

In the group accounts, you cannot owe/be owed by yourself - so simply cancel these out:

Dr Payable (in P)
Cr Receivable (in S)

The only time this wouldn’t work is if the amounts didn’t balance, and the only way this could happen is because something was still in transit at the year end. This could be stock or cash.

You always alter the receiving company. What I mean is - if the item is in transit, then the receiving company has not received it yet - so simply make the RECEIVING company receive it as follows:

Stock in transit

In the RECEIVING company’s books:

Dr Inventory
Cr Payable

Cash in transit

In the RECEIVING company’s books:

Dr Cash
Cr Receivable

Having dealt with the amounts in transit - the inter group balances (receivables/payables) will balance so again you simply:

Dr Payable
Cr Receivable

Intra-group dividends

eliminate all dividends paid/payable to other entities within the group, and all intragroup dividends received/receivable from other entities within the group.