Group Accounts: Further Aspects

Question 1

How do you prepare a statement of profit or loss

Answer 1

Add together the statements of the parent and the subsidiary, line by line.

Split the profit for the year between the parent and the non controlling interest.

Question 2

What two adjustments are made when one company sells goods to another?

Answer 2

1) Eliminate the sale
Debit Revenue
Credit COS

2) Eliminate the unrealised profit
Increase the COS by the amount of unrealised profit

If the sale is from subsidiary to parent deduct the NCI share of unrealised profit from Profit or Loss front the period.

Question 3

How to you check the equity holders of the parent value is correct?

Answer 3

Parent profits
less dividends received
less unrealised profit (if sold goods to subsidiary)

PLUS

Subsidiaries profit
less unrealised profit (if sold goods to parent)
multiplied by parents ownership as a percentage