How to make offset entries for internal transactions in consolidated statements?

Answer: Offset of internal transactions

Principle: Adjustment entries in consolidated statements must always follow one idea. From the perspective of the group as a whole, whatever is more will be removed, and whatever is missing will be added. When doing the questions, which of the subjects in the offsetting entries is to offset the parent company, which is to offset the subsidiary, and which entry is neither to the subsidiary The company is not the parent company, but is reflected in the group's financial statements?

The offset of internal merchandise sales without considering inventory depreciation provisions

Debit: operating income

Credit: Operating costs

Inventory

Debit: Undistributed profits at the beginning of the period (unrealized internal sales profits at the beginning of the year)

Operating income ( Sales revenue generated during the current period)

Inventory (internal sales profit realized at the end of the current period)

The preparation idea of ??the above entries: Unrealized internal sales revenue incurred during the current period and The difference in unrealized internal sales profits in the inventory incurred during the period is the unrealized internal sales cost incurred in the current period. The difference between the "opening undistributed profits" and "inventory" in the offsetting entry is the inventory incurred in the current period. Unrealized internal sales profits.

If you understand the above preparation process, then the author will tell you a simple and crude method to quickly write offsetting entries:

①Inventory at the beginning of the year Offset the unrealized internal sales profits in the current period:

Debit: Undistributed profits at the beginning of the period (unrealized internal sales profits in the opening inventory)

② Offset the internal sales revenue of the current period

Debit: operating income (income generated from internal sales of goods in the current period)

③Offset the unrealized internal sales profits in the closing inventory

Debit: operating costs

Credit: Inventory (unrealized internal sales profit in inventory at the end of the period)

Quick calculation: Unrealized internal sales profit in inventory can be replaced by gross profit margin;

Gross profit margin = (sales revenue - cost of sales) ÷ sales revenue

Unrealized internal sales profit in inventory = unrealized sales revenue - unrealized cost of sales

Unrealized internal sales in inventory Profit = the value of the buyer's internal inventory balance × the seller's gross profit margin

What are the functions and characteristics of the offset entries in the consolidated statement?

The purpose and function of the preparation of the consolidated offset entries are determined It is different from other accounting entries prepared in daily accounting processing and has the following characteristics.

1. Consolidated offsetting entries mainly play the role of offsetting the data of relevant statement items.

Based on this feature, it is usually possible to determine the specific items involved in the debit and credit side of the consolidated offset entries based on the nature of the statement items, without mistaking the credit direction of the statement items to be offset. For example: when offsetting When there is unrealized profit in internal inventory, fixed assets and intangible asset transactions, if the internal selling price of the relevant assets is higher than the book value or cost of the original seller, the unrealized profit is a profit, resulting in the closing of the relevant assets in the individual financial statements. The book value of the asset is overestimated. When preparing a consolidated offset entry, the credit should offset the related asset items and the debit should offset the related profit and loss items. If the internal selling price of the related assets is lower than the book value or cost of the original seller, no The realized profit is a loss. As a result, the book value of related assets at the end of individual financial statements is underestimated. When preparing consolidated offsetting entries, debits should offset related asset items and credits should offset related profit and loss items.

2. Consolidated offsetting entries do not need to be posted, and will not cause changes in the data of financial related items in individual statements in the current and subsequent periods. Preparing consolidated offsetting entries makes the reflection of internal transactions in individual financial statements consistent with the reflection in the consolidated financial statements, but this This consistency is only for the purpose of preparing consolidated financial statements, rather than adjusting the individual financial statements provided by the parent company and subsidiaries. Therefore, consolidation offsetting entries do not need to be posted, and the preparation of consolidation offsetting entries does not mean that the individual statements are financially relevant. The account book data and statement data of the project have changed.

3. The consolidated offsetting entries offset the statement items and not the specific accounts. Yes

The item names of the accounting statements are not exactly the same as the corresponding account names. When preparing accounting entries for daily accounting business, debit and creditors use the corresponding account names. When preparing consolidated offset entries, the debit and creditors must use the corresponding report item names. When the name of the report item is inconsistent with the name of the corresponding account, the name of the report item is used. For example, in the consolidated offset entry, "inventory", "original price of fixed assets", "beginning of undistributed profits", "withdrawal of surplus reserve" will be used. Instead of using account names such as "raw materials", "inventory goods", "fixed assets", "profit distribution" etc.