Accounting

In a multi-company environment, transactions between the logistic companies and between financial companies create the need to balance the accounts through intercompany transactions. Intercompany transactions occur, for example, if the enterprise units of the sales office and the purchase office, work center, or warehouse involved in a logistic transaction are linked to different financial companies, or belong to different logistic companies. These types of intercompany transactions exist: Multi-finance intercompany transactions Intercompany transactions between the financial companies in a multi-finance company structure. Intercompany settlement transactions Settlement transactions between the logistic companies in a multi-logistic/single finance company structure. Intergroup transactions Financial transaction between financial groups in a multi-finance company structure with multiple financial groups. Multi-finance intercompany transact...

Meaning and definition of Consolidated Financial Statements Consolidated financial statements refer to the financial statements which lead to the subsidiaries of the holding company its summative accounting figure. Putting another way, consolidated financial statements can be addressed as the combined financial statements of a parent company and its subsidiaries. According to IAS 27 "Consolidated and separate financial statements", consolidated financial statements are the financial statements of a group presented as those of a single economic entity. As stated by Investopedia, the consolidated financial statements enable you to determine the general health of an entire group of companies as compared to a company’s stand alone position. This is because these financial statements provide an aggregated look at the financial position of a company and its subsidiaries. Purpose of consolidated financial statements The key purpose of preparing consolidated financial s...

There are some common types of costs incurred in an operating property are: Cleaning services; Security; Water; Electricity; Heating-ventilation-and-air-conditioning (HVAC); Payroll; Insurance; Repairs and maintenance; Leasing costs; Loan closing costs; Management fees; Property taxes; Sales and use taxes; Additional services bill-backs. 1. Cleaning Expenses Cleaning involves the cost of cleaning both inside and outside of the property. This service is either provided by the property owner’s personnel or outsourced to third-party cleaning companies. If it is performed by the owner’s personnel, this cost would be part of payroll expenses. Cleaning cost is a period cost and should be expensed during the applicable periods. Therefore, the journal entry to record this type of expense would be: [Debit] Cleaning expense = $xx [Credit]. Cash or Accounts Payable = $xx However, in an outsourced cleaning scenario, the parties might agree that the owner would pay in ad...

Intercompany Eliminations Explained intercompany eliminations happen for business combinations. The whole thing kind of confuses me. Can you explain the process and the journal entries to record the intercompany eliminations? Answer: Remember that in a business combination, we are trying to eliminate any transactions between the parent and the subsidiary so that we only have transactions with 3rd parties left after our consolidating entries. So, let’s assume Company A owns Company B and A sells $120,000 of inventory to B. Let’s also assume that Company A gets a 40% margin on all sales and Company B has 30% of the inventory remaining at the end of the year. With this set of facts, they could ask you a wide variety of questions on the CPA exam. One of the tricks to solving problems involving intercompany eliminations is to understand the entries that A and B would book in these cases. One of the other tricks is understanding the relationship between cost and margin percentage. ...

Intercompany As different units of your client conduct their business, and there are transactions between the units, there will always be differences between the financial numbers recorded by them. Ideally these differences should not exist. So, why do these differences happen? There could be thousands of reasons for this, some of the more regular ones are listed below: Timing difference – one most popular cause – material may be in transit, the advice for the entry takes time to reach, month end entry intimation is received late, email not read for advice and more. Missing advices – the advices for inter unit entries got missed in transit. Different values – the basic values of material moved from unit to unit are different in the two units, so the quantity is properly recorded but the unit transfer price being different causes a balance upset. Uninformed debits / credits – some debits / credits may happen at a unit and may not be informed to the other units. Disputed ...

In financial term, hedge is a strategy intended to protect an investment or portfolio against loss. It usually involves buying securities that move in the opposite direction than the asset being protected. In other terms a n investment made to reduce the risk of adverse price movements in a security, by taking an offsetting position in a related security, such as an option or a short sale. Let's assume part of your investment portfolio includes 100 shares of Company XYZ, which manufactures autos. Because the auto industry is cyclical (meaning Company XYZ usually sells more cars and is more profitable during economic booms and sells fewer cars and is less profitable during economic slumps), Company XYZ shares will probably be worth less if the economy starts to deteriorate. How do you protect your investment? Let’s understand with the below example:- One way is to buy defensive stocks. These stocks might be from the food, utility, or other industries that sell...

Journal Entry Examples Entity A had the following transactions in December 2xx1: 1. December 2, Owner P created a new Entity B and invested $140,000 in cash.  2. December 9, Entity B borrowed $80,000 from a bank.  3. December 11, Entity B purchased 3,000 units of merchandise at $10 per unit in cash.  4. December 18, Entity B purchased equipment and paid $70,000 in cash. 1.        Investment by owner December 2, Owner P created a new Entity B and invested $140,000 in cash. Debit Credit Cash 140,000    Owner's equity 140,000 [Note] Debit: Increase in cash (asset) Credit: Increase in owner's equity (equity) 2.        Borrowings from a bank December 9, Entity B borrowed $80,000 from a bank. Debit Credit Cash 80,...

Reconciliation of the general ledger to sub-ledgers is another type we will review. The general ledger (or simply "ledger" or "G/L") is a collection of all balance sheet and income statement accounts. The general ledger also includes all journal entries posted to accounts. In nowadays' computerized world, the ledger is maintained in an electronic form. A sub-ledger is a detailed record of transactions for an individual account. Usually, a sub-ledger contains detail of transactions for an account, which are summarized by day (or month) and the total is then posted to the general ledger. Therefore, sub-ledgers serve as support for amounts posted to the general ledger. Sub-ledgers are presented in an electronic form as well (e.g. Excel file, detail of an account in QuickBooks, SAP or Oracle). For example, accounts receivable sub-ledger may contain detail for all issued invoices and cash receipts. At the end of a day, an accountant can summarize all invoic...

Procure to Pay process flow. 1. Requester: Request for goods & the same goes for an approval 2. PR is created & routed for approval 3. Once approved, PO is created. 4. Sourcing activities like, Choosing the right Vendor, Payment info happens meanwhile, 5. PO is routed for approval 6. PO is sent to the supplier.& Vendor signs the agreement (Payment terms) 7. Supplier will send the goods along with Invoice.(PO Number mentioned) 8. Good received & GRN entry is made. 9. Invoice is sent to the AP team 10. AP team process the Invoice (3 way match) - GL coding will be automatically pulled. 11. process for Payment Few Journal Entries examples are as followed. 1. Goods Received Ware House Dr        Inventory a/c             Cr                    GRNI a/c 2. Inv. Regis...