Accounting

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...

To record a sale to an account customer Account Debit Credit Accounts receivable XXX Revenue XXX To receive a cash payment from an account customer Account Debit Credit Cash XXX Accounts receivable XXX To receive a cash payment from an account customer taking cash discount Account Debit Credit Cash XXX Discount allowed XXX Accounts receivable XXX A credit note is issued to a customer Account Debit Credit Revenue XXX Accounts receivable XXX To write off an accounts receivable as a bad debt Account Debit Credit Bad debt expense XXX ...

Depreciation is the expense therefore we need to decrease in the value of any fixed asset. The reduction in value of an asset due to normal usage, wear and tear, new technology or unfavorable market conditions is called Depreciation. Assets such as plant and machinery, buildings, vehicles etc. which are expected to last more than one year, but not for the infinity are subject to depreciation. Example :- Journal entry for depreciation Depreciation A/C               Debit    To Asset A/C                                   Credit (Assuming no provision is maintained) Rules applied in the above journal entry •          Depreciation – Nominal Account – Dr. All expenses & losses •...