1 Replies
Sathish Karunakaran
(ACA)
(614 Points)
Replied 24 November 2007
In books of Plant I
Dr. Plant II xxx
Cr. Inter-segment Sales (Plant II) xxx
In books of Plant II
Dr. Inter-segment Purchases (Plant I) xxx
Cr. Plant I xxx
On consolidation of both plants' books -
aforesaid inter-segment sales & purchases get eliminated under "inter-segment" column in Profit & Loss Account.
aforesaid Plant I & II balances get eliminated in Balance Sheet.
in case of goods sold by plant I to plant II is in inventory of Plant II as on date of consolidation, then a provision must be created to remove profit element from such inventory to the extent of 10% on cost of such inventory.
i.e
Dr. Provision on Stock Reserves xxx (10% on Cost or 10/110 on value of inventory)
Cr. Stock Reserve xxx
this reserve shown dedcuted from concerned inventory and net balance only disclosed in B/s.
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