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Unformatted text preview: nts)
e.g. H Ltd purchased
goods from S Ltd H Ltd
with S Ltd
(creditor a/c) e.g. S Ltd sold goods
to H Ltd
Cancel out of
indebtedness S Ltd
with H Ltd
(debtor a/c) In general, these two current accounts should equal to each other. However,
discrepancies may happen if there are some transactions that have not been
recorded by one of the parties e.g. cash in transit or goods in transit etc.
25 Example 2
• H Ltd acquired 80% of the shares in S Ltd on 1
January 20X0 when the retained profits of S Ltd
• H Ltd and S Ltd declared final dividends of $1M
and $400K respectively on 31 December 20X2.
• At the year end, there are items in transit:
– Goods, from H Ltd to S Ltd : $300,000
– Cash, from S Ltd to H Ltd : $100,000 • Goodwill is impaired by the amount of $110,000.
26 Example 2
The statements of F/P of H Ltd and S Ltd at 31 December 20X2 are as
$000 Non-current assets
Investment in S Ltd
Current account with S Ltd
Less: Current liabilities
Current account with H Ltd
Share capital @$1
Proposed final dividends $000 9,000
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- Spring '14