GROUP ACCOUNT: INTRA COMPANY

TRANSACTION

Introduction

FINANCIAL Previous chapter was discussion basic of group

account which is required by FRS 127 Separate

ACCOUNTING 4 Financial Separate. There is a common practices by

holding and subsidiary to have transaction among
them. For example Holding sell assets to subsidiary
in order to increase production. This transaction only
involve between them and known as related party
transaction. RPTs are defined as deals entered into
by at least two entities, one of which has control over
the other or where the parties come under the same
control of another (CFA, 2009). RPT in Malaysia are
accounted using FRS 124.

According to Financial Reporting Standard 124

Related party Disclosure, holding need to disclosure
all transactions related with subsidiary. A big issue
of RPT is about expropriation either by holding or
subsidiaries. The possibly happen when holdings sell
CHAPTER 2 the asset under market value in order to increase
subsidiary profit or sell with higher price to shows
better profit for holding.

GROUP ACCOUNT: INTRA GROUP TRANSACTION

INTRA COMPANY
Debtors/creditors Assets
TRANSACTION
Inventories Dividends

Co. D

A Acquired 80% shares in B

Co. A Co. B

Co. C

26
 RM
Current Asset
INTRA GROUP TRANSACTION Trade Receivables -

Current Liability
Trade Payables -
Debtors/creditors Assets (3)

(1) Inventories Dividends Related party transaction may include transaction:

(2) (4)
a. Loan to subsidiary and from holding
Subsidiary borrows some amount from
holding for certain period and purpose.
Debtors/Creditors Loan, current Account Both parties undergo for agreement of loan.
Implication of the transaction into
A Acquired 80% shares in B accounting aspect is a liability of
A subsidiaries may increase and asset for
Co. A Co. B = Adjustment holding become better (debtor). However,
when both parties consolidated the account
RM100,000 B (financial statement) the transaction, loan
given to subsidiary will return back to
holding and in others words that the
transaction is not happen. According to this
Consolidation Account
matter, amount owing each other has to be
A B eliminated.

Loan 1,000 2,000 b. Item in transit (Goods/Cash)

Subsidiary has interest in holding and
Extract Consolidated Statement of Financial otherwise, so the transaction between them
Position as 31 December 2021 is common practice. Holding send goods or
money to subsidiary for business purpose
Current Liabilities
but sometimes will receive across
Loan (1k +2K) 3K
accounting period. This shows that only
one party record the transaction but others
still not and required adjustment.

Statement of Financial Position as at 31 c. Current Account

December 2018 (Extract) Related party transaction occurs between
Co. A holdings and under his control such as
Current Asset subsidiary. The transactions may create
Trade Receivables -Co. B 100,000 current account between them. For
accounting perspective when one party
record and other party required to record
Statement of Financial Position as at 31 with same amount. D
December 2018 (Extract) uring consolidated financial statement, the
Co. B amount should be eliminated. Furthermore,
if only party already recorded but other is
Current Liability
not, there is very important to make
Trade Payables – Co. A 100,000
adjustment before eliminated both current
account.
Co. A
Consolidation Statement of Financial Position d. Bills Receivable/payable &
as at 31 December 2018 (Extract) Debtor/Creditor

27
 The transaction base on sale credit will
shows existing of debtor and creditor for
both parties in accounting book. The
transaction cannot be counted because
when consolidated it shows the sales is not
occur. Therefore, the amount should be
cancelling when to consolidate.

e. Interest receivable/payable
This transaction is close with previous
transaction when credit sale apply so the
interest also include into transaction.
Therefore the amount should be eliminated
during consolidated financial statement.

f. Dividend receivable/payable
Holding has intention to address better
profit by showing better dividend
throughout investment in subsidiary.
However, this may shows the expropriation
because the money basically may or may
not come from holding but the dividend
need to pay. In addition, the dividend
amount should be cancel for both parties.

RELATED PARTY TRANSACTION (RPTS) IN

ACCOUNTING PERSPECTIVE

RPTs - DEBTOR & CREDITOR

Transaction intra group may occur from holding to

subsidiary or otherwise. If the transaction base on
credit matter, this situation may create debtor and
creditor among them. The transaction is recorded by
both parties during the accounting period. According
to FRS 127, Holding is required to prepare
consolidation financial statement. The debtor and
creditor recorded by both parties need to cancel
when prepare the consolidation financial statement.

28
 Cost of Control (CCA) – 100%
Example 1 Investment 650,000 Ord. 560,000
Balance Sheet as at 31 Dec 2013 – in B shares
A B Profit & 45,000
Non-Current Assets Loss
Vehicles 75,000 120,000 Goodwill 45,000
Machine - 440,000 650,000 650,000

Investment – B (cost)
- Ord. Shares 650,000 - P&L-B
CCA 45,000 Balance 45,000
Current Assets b/d
Stock 50,000 40,000
Debtors: B Bhd 3,000 - 45,000 45,000
Others 7,000 20,000
785,000 620,000
Consolidated
Paid up Capital
Ord. Shares@RM1.00 715,000 560,000 P&L-A
Profit & Loss Acct 50,000 45,000 Goodwill 9,000 Balance 50,000
(45K /5) b/d
Current Liability Balance 41,000
Creditors : A Bhd 3,000 c/d
Others 20,000 12,000 45,000 45,000
785,000 620,000
Co. A
A acquired equity shares of B, 560,000 units for Consolidated balance Sheet as at 31 Dec 2013
RM650,000 Ord. Shares on 31 December 2013. Non-Current Assets
Vehicles 195,000
[Goodwill is to be amortised over 5 years]. Machine 440,000

You are required: Goodwill 36,000

a. Cost of Control account Currents Assets
b. Consolidated Profit & Loss Account Sock 90,000
Debtor (7K + 20K – 3K (intra)) 27,000
c. Consolidated balance Sheet
788,000
Paid up Capital
Holding by A = 560,000 units/560,000 units x100%
Ordinary shares 715,000
Profit & Loss Account 41,000
= 100%
Current Liability
Creditors (20K+12K – 3K(intra)) 32,000
788,000

Answer

29
 Profit&Loss Account 70,000 50,000
Question 1
Current Liabilities
Consolidated balance Sheet as at 31 Dec 2013 Bill payable 50,000 32,000
A B Current Account - A - 8,000
Non-Current Assets Creditors 90,000 80,000
Vehicles 75,000 120,000 1,410,000 770,000
Machine - 440,000
In additional information
Investment – B (cost)
- Ord. Shares 650,000 - 4. A acquired the shares in B when the latter had a
balance of RM15,000 in its profit and loss
Current Assets account.
Stock 50,000 40,000 5. The difference in the current account are due to
Debtors: B Bhd 10,000 20,000 cash in transit
6. Out of the total bill receivables of A RM2,500 is
785,000 620,000 from B.
Paid up Capital 7. Out the total bill payable of A RM1,500 is to B
Ord. Shares@RM1.00 715,000 560,000
Profit & Loss Acct 50,000 45,000 You are required to prepare;
a. Cost of Control Account
Current Liability b. Consolidated Profit&Loss account
Creditors : 20,000 15,000 c. Minority Interest Account
785,000 620,000 d. Consolidated Balance Sheet

1. A acquired equity shares of B 560,000 units for

RM650,000 Ord. Shares on 31 December 2013.
2. Out of the total Debtors of A RM3,000 is from B.
3. Out the total Creditors of B RM2,500 is from A
You are required:
a. Cost of Control account
b. Consolidated Profit & Loss Account
c. Consolidated balance Sheet
Note:
RPTs only involve transactions such as Current
accout, Bill receivable and payable. All transactions
do not affect Cost of Control, Consolidated
Profit&Loss account. But consolidated may be
affected after adjusted.

Answer 1
Example 2
Holding (%) = 400,000 / 500,000 x 100 = 80
Balance Sheet as at 30 June 2013
A B
Cost of Control (CCA) 80%
Non-Current Assets
Land&Building 270,000 340,000 Investment 490,000 Ord. 400,000
Machine 210,000 170,000 – in B shares
P.Shares 50,000
Investment in B Profit & 12,000
-400,000 units O.S 440,000 - Loss
-50,000 unit 10% P.S 50,000 - Goodwill 28,000
490,000 490,000 490,000
Cuurent Assets
Bank 120,000 90,000 Cons. Profit & Loss Acct
Inventories 160,000 66,000 A B A B
Current accounts - B 10,000 - CC - 12,00 Bal 70,00 50,00
Bill receivable 8,000 4,000 A 0 . 0 0
Debtors 142,000 100,000 MI 10,00
440,000 260,000 0
1,410,000 770,000 Bal. 70,00 28,00
Paid-up Capital 0 0
Ord Shares@RM1.00 1,000,000 500,000 70,00 50,00 70,00 50,00
10% Per. Shares 200,000 100,000 0 0 0 0

30
 1,005,000 345,000
Minority Shareholder (20%) Paid-up Capital
Balance 160,000 Ord. Shares 100,000 Ord Shares@RM1.00 800,000 240,000
Pre. Shares 50,000 Profit&Loss Account 175,000 20,000
(20%) Profit&Loss 10,000
160,000 160,000 Current Liabilities
Bill payable 10,000 25,000
Trade Payables 20,000 30,000
Loan From B - 30,000
Consolidated Balance Sheet as at 30 June 2013 1,005,000 345,000
Additional Information
1. A acquired the 150,000 units ordinary shares
Non-Current Assets of B on 1 january 2011 when accumulated
Land&Building 610,000 profit of B was RM10,000.
Machine 380,000 2. Trade receivables of A include RM15,000
due from B. This includes amount due of
inventory costing RM5,000 sent by A to B on
Goodwill 28,000 31 December 2011 but recieved on 15 Januari
Cuurent Assets 2012
Bank 212,0001 3. B remitted RM5,000 on account to A and
Inventories 226,000 received the remittance on 4 January 2012.
Bill receivable 8,0002
Debtors 242,000 You are required to prepare:
a. Cost of control
1,706,000 b. Minority Interest
Paid-up Capital c. Consolidated Profit&Loss Account
Ord Shares@RM1.00 1,000,000 d. Consolidated Balance Sheet.
10% Per. Shares 200,000
Profit&Loss Account 98,000

MI 160,000
Current Liabilities Note
Bill payable 78,0003 Holdings: 150,000/240,000 x 100% = 62.5 %
Creditors 170,000
1,706,000 Reminder: Please don`t make around figure and
leave as 62.5% .

Question 1

Balance Sheet as at 31 December 2011

A B
Non-Current Assets
Land&Building 400,000 180,000
Machine 210,000 110,000

Investment in B
-150,000 units Ord
Shares 190,000 -

Cuurent Assets
Bank 50,000 10,000
Inventories 70,000 30,000
Trade Receivable 30,000 5,000
Bill receivable 20,000 10,000
Loan to B 35,000 -
205,000 55,000

1 3
RM2000 cash in transit should plus in A (bank) Bill payable minus RM2,500 and RM1,500
2
Bill receivable minus RM2,500 and RM1,500

31
 should be cancel. The profit gain either by holding
or subsidiary is consider as unrealis profit. If the
INTRA GROUP TRANSACTION profit does not remove, the balance sheet will show
better profit and this may influence other shareholder
interest to invest. Furthermore, dividen paid will be
higher and benefit to major shareholder.
Debtors/creditors Assets (3)
Diargram 1: General Point of View – Transaction
(1) Inventories Dividends RPTs
(2) (4)
Supplier
RM100 (cost)

Holding Subsidiary
A Acquired 80% shares in B RM150(sale)

Diagram 1 shows that holding gain profit via

Supplier transaction with subsidiary by sell inventory RM50
Co. C (RM150- RM100). The date of transaction occurred
both parties already recorded the transaction.
RM100 (cost) Therefore, financial statement current year will show
profit including RM50 from the transaction. The
Co. A Co. B inventory that holding sell to subsidiary will counted
as holding belonging (as long as not sell to third
RM150 (sale) party). So that there is not fair to declare the RM50
Customer is profit while the inventory still belongs to holding.
Co.A XX Trading Therefore the amount should be removed. However,
Profit =RM150 – RM100 if subsidiary is able to sell the inventory then the
= RM50 profit can be counted as realization profit. Holding
Co. A can record RM50 as profit after subsidiary able to
unrealis Profit sell to customer.

Co.B Diargram 2: General Point of View – Transaction

RPTs

Supplier
80% - sales
RM100 (cost)
20% - -inventory - unrealis profit
Holding Subsidiary
RM150(sale)
RM200(sale)

Customer

RPTs – INVENTORY

Holdings may sell goods to subsidiary which create

the RPTs. The goods recieved by subsidiary will sell
to the customer. Holding will record profit from that
transaction. The profit will consider as realis profit if
the subsidiary able to sell all goods to customers.
Otherwise, the profit is unrealis and need to made
adjustment (cancelling) in holding book. The
holding only record the profit as many will sell by
subsidiary. Mainly reason is the inventory where sell
to subsidiary will return back to holding when
fiancial be consolidated. In other words, there is not
transaction occur between holding and subsidiary.
Therefore, any profit throughout the transaction

32
Example 1 You are required
a. Cost of control
Balance Sheet as at 31 December 2013 b. Consolidated Profit&Loss Account
A B c. Minority Interest
Non-Current Assets d. Consolidated Balance Sheet
Land&Building 250,000 330,000
Machine 100,000 200,000
Note:
Investment in B a. RPTs such as invetory may affect cost of
-405,000 units Ord control account and profit and Loss
Shares 600,000 - b. Inventory; Cost RM40,000and sell to A
RM55,000. Profit RM15,000. Unsold
Cuurent Assets RM10,000. Question, How much profit for
Bank 50,000 40,000 unsold stock? Total profit is RM15,000 if
Inventories 70,000 60,000 all stock is sold. Calculation
Debtors 10,000 10,000
1,080,000 640,000 Unrealisation Profit:
Paid-up Capital RM10,000/RM40,000 x RM15,000
Ord Shares@RM1.00 630,000 450,000 = RM3,750
Profit&Loss Account 250,000 150,000 c. Inventories=(RM70,000+RM60,000 –
RM3,750)
Current Liabilities
Creditor 200,000 40,000
1,080,000 640,000
Additional Information
1. A acquired B on 1 January 2013 when profit
and loss account of B was RM8,000
2. During the year 2013, B sold inventories
costing RM40,000 for RM55,000 to A and Answer 1
RM10,000 of goods still remain in the closing Holding = 405,000/450,000 x 100% = 90%
inventories of A.
Cost of Control (CCA) 90%
Investment – 600,000 Ord. shares 405,000
1/1/13 31/12/13 in B
Profit & 7,200
Acquired Closing Loss
Goodwill 187,800
600,000 600,000

Co. A 55,000 Co. B Cons. Profit & Loss Acct

A B A B
CCA - 7,200 Bal 250,000 150,000
Inv. 3,750 .
MI 15,000
Bal 250,000 124,050
Consolidated 250,000 150,000 250,000 150,000

Minority Shareholder (10%)

Cost Inventory = RM10,000 Balance 60,000 Ord. Shares 45,000
Profit&Loss 15,000

60,000 60,000

RM55,000 – RM40,000 = RM15,000

Inventory – unsold = RM10,000 (how much profit ?)
10,000 /40,000 x 15,000 =

33
 Consolidated Balance Sheet as at 31 You are required
December 2013 a. Cost of control
Non-Current Assets b. Consolidated Profit&Loss Account
Land&Building 580,000 c. Minority Interest
Machine 300,000 d. Consolidated Balance Sheet

Goodwill 187,800
Cuurent Assets
Bank 90,000 Note
Inventories 126,250
Debtors 20,000 The questions show the RPTs is about Inventory.
1,304,050 The transaction makes profit for A which is affected
Paid-up Capital the inventory and profit & loss account. However, B
Ord Shares@RM1.00 630,000 cannot make sell during accounting period and
Profit&Loss Account 374,050 inventory will remain. According to this matter, A
should make adjustment throughout inventory and
MI 60,000 profit & loss account.
Current Liabilities
Creditors 240,000
1,304,050

Question 1
Question Comprehensive
Balance Sheet as at 31 December 2013
A B Balance Sheet as at 31 December 2013
Non-Current Assets Non-current Assets A B C
Land&Building 250,000 330,000 `000 `000 `000
Machine 100,000 200,000 Machinery 342 167 85
Investment:
Investment in B A Bhd – 72,000 120 - -
-405,000 units Ord B Bhd – 28,000 65 - -
Shares 600,000 -
Current Assets
Cuurent Assets Bank 26.5 34 13
Bank 50,000 40,000 Inventories 20.6 43.2 16
Inventories 70,000 60,000 Bills Receivable 50.9 - -
Debtors 10,000 10,000
1,080,000 640,000 Financed by:
Paid-up Capital Ord. Shares@RM1 340 80 40
Ord Shares@RM1.00 630,000 450,000 General Reserve 47.6 24.1 11
Profit&Loss Account 250,000 150,000 Profit & Loss 146 74 36

Current Liabilities Current Liabilities

Creditor 200,000 40,000 Bills Payable 15.6 43.1 11
1,080,000 640,000 Creditors 54 23 16
Additional Information Rent Payable 21.8 - -

A acquired B on 1 January 2013 when profit and loss Additional Information

account of B was RM8,000
During the year 2013, A sold inventories valued
RM40000 to B with goods invoiced at cost plus 25%.
But RM10,000 of goods unsold until the end of
accounting period.
• A Bhd acquired shares of B Bhd and C Bhd on
31 December 2013 when the balances of profit
and loss were RM50,000 and 25,000.
• For the financial year ended 31 December. A
bhd sold the inventories of RM33,000to B Bhd
and RM12,000 to C Bhd. The inventories were
invoiced at cost plus 45%. At the end of the

34
 accounting year, half of the inventories were Reserve
sold by B Bhd and 50% by C Bhd. General:
• Bill receivables of A Bhd were amount by B B 2,410
Bhd of RM28,000 and RM45,000 by C Bhd. C 3,300
43,910 43,910
You are required:
a. Cost of Control Consolidated Balance Sheet as at 31/12/13
b. Minority Interest Non-Current Assets
c. Consolidated Profit & Loss Account Machinery 594,000
d. Consolidated Balance Sheet as at 31
December 2013 Goodwill 22,500
Cuurent Assets
Bank 85,400
Note: Inventories 72,817
A B C 774,717
BR: 50,900(Write Off) Paid-up Capital
Ord Shares@RM1.00 340,000
BP 43,000 11,000 (Write off) Profit&Loss Account 168,317
(28,000)W.off)(45,000) Gen. Reserve 76,990
MI 43,910
A: 73,000 – 50,900 = 22,100 (write off) Current Liabilities
C: 45,000 – 11,000 = 34,000 (write off $22,100) Creditors 93,000
Difference (11,900) – cash in transit Rent Payable 21,800
Bill Payables 30,700
774,717
A`nswer

B = 72,000/80,000 x 100% = 90%

C = 28,000/40,000 x 100% = 70%

Cost of Control (CCA) 90%

Investment: Ord. shares
B Bhd 120,000 B: 72,000
C Bhd 65,000 C 28,000
Profit&loss
B 45,000
C 17,500
Goodwill:
B 3,000
C 19,500
185,000 185,000

Cons. Profit & Loss Acct

A B C A B C

CCA - 45,000 17,500 Balance 146,000 74,000 36,000

Inv. 6,983 - -

MI 7,400 10,800

Bal 139,017 21,600 7,700

146,000 74,000 36,000 146,000 74,000 36,000

Minority Interest
Balance 43,910 Ord. shares
B: 8,000
C 12,000
Profit&loss
B 7,400
C 10,800

35
 Before Consolidated the asset is stand alone.

INTRA GROUP TRANSACTION

Company A Company B

Debtors/creditors Assets (3)

(1) Inventories Dividends

(2) (4)
Balance sheet as at 31… Balance sheet as 31..
RM RM
Vehicle 120,000 Vehicle 5,000

INTRA GROUP TRANSACTION

After sales and balance sheet shows as below

NON_CURRENT ASSETS
Company A 100% Company B

Sales Revaluation
Sale vehicle (RM60,000)
Cost of control Ac
Co. A = Balance vehicle = RM120,000 – RM60,000
- Profit & Loss (net book value – Cost)
=RM60,000
- Depreciation – compare before after
sales
Co. B = Balance = RM5,000 + RM60000
= RM65,000
RPTs - SALE OF NON-CURRENT ASSETS
Consolidated Co. A + Co. B – Assets
Vehicle = RM60,000 + RM65,000
In accounting perspective, the profit from asset
Total Amount = RM125,000
transaction does not consider as company profit.
Mainly reason is the assets will return back to the
Solution
company who sell it.
A Group
Balance sheet as at 31……………
Sometimes holding sell goods to Subsidiary, these
RM 65,000
are kept by Subsidiary and used as non-current
Vehicle 125,000
assets. In this situation, there are two matters to
60,000
consider

1. Unrealized profit in the non-current assets,

which must be eliminated on consolidation
60,000
Dr. Con P & L xxx
Cr. Non-current Assets xxx 60,000 + 5,000

2. Depreciation which includes the Co. A Co. B

unrealized profit which must also be
eliminated on consolidation

Dr. Prov for Dep xxx

Cr Con P & L xxx
Consolidated 125,000

36
 2. Unrealis profit
3. New depreciation - old depreciation

Cost Inventory = RM10,000

Balance sheet before and after consolidated shows

the amount is still same for holding. Before sell,
Holding acquire RM120,000 then after sell balance
is RM60,000 and consolidated balance show the
amount is back to RM120,000.
RPTs involve with assets may affect to depreciation
and profit. Since the amount sells return back to
seller, depreciation should be adjusted.

Example 1
During 2013, A sold a vehicle valued (NBV)
RM10,000 for RM15,000 to B and depreciation is 5
years base on straight line.

Table 1
Discussion:

Sale: RM15,000
Co. A Co.B

Cost: RM10,000

Situation 1
Co. A
Statement of Financial Position as at 31 Dec 2012 Situation 2
(Extract) Co. B
Non_Current assets Statement of Financial Position as at 31 Dec 2012
Vehicles 10,000 (Extract)
Non_Current assets
Calculation Proft & Loss For Co. A Vehicles -

NBV 15,000
Purchase Vehicle from Co. A at price RM15,000
Depreciation 2,000 (10,000 / 5)
Statement of Financial Position as at 31 Dec 2013
Sales 15,000 (Extract)
NBV (10,000) Non_Current assets
Profit 5,000 Vehicles 15,000

Profit shows in Co. A

Depreciation Policy for Co. B is 5 years.
Statement of Financial Position as at 31 Dec 2013
(Extract) RM15,000/5 = 3,000
Non_Current assets
Vehicles -
Situation 3
Profit & Loss 2,000 Co A
Consolidated Statement of Financial Position as at
31 Dec 2013 (Extract)
Non_Current assets
Unrealis profit Vehicles 15,000

Adjustment
1. Nilai Aset Yang Baru - old Asset RM15,000 – RM10,000 = RM5,000

37
 RM2,000 Table 4
RM3,000 – RM2,000 = RM1,000 Balance sheet as…..
RM
Vehicles 10,000 (RM15,000-RM5,000)
Financial statement stated at below show if the
vehicle is not sell by Co. A to Co. B Profit and loss acct
Depreciation RM3,000 Depreciation 1,000
Table 2 Unrealis Profit 5,000
Co A before sales
Balance sheet as….. RPTs may contribute to increasing of private wealth
RM among the board of director throughout better profit.
Vehicles 10,000 Therefore, RPTs required to be disclosure in order to
give clear picture to existing and potential
Profit and loss acct shareholder to get know about the business operation
Depreciation RM2,000 especially RPTs.

Financial statement stated at below show after

RPTs.

Table 3
After Sales

Balance sheet as…..

RM
Vehicles 15,000

Profit and loss acct

Depreciation RM3,000

Table 1 shows the transaction between Co. A and Co.

B with cost RM10,000 and selling price is
RM15,000. Table 2 shows the accounting books in
Co. A if the vehicle does not sell. Furthermore, Table
3 shows accounting books in Co. B after vehicle is
sell by Co. A. There is very important to know the
origin transaction before RPTs because when the
financial statement required consolidate the new
transaction which is involve with assets should be
recorded as origin.

Throughout the RPTs as shown in Table 1, Co. A

was gained RM5,000 profit from the transaction.
(RM15,000 - RM10,000). Before sell, depreciation
may show RM2,000 (RM10,000/5) in Co. A.
However, after sell, Co. B will show depreciation is
RM3,000 (RM15,000/5). When financial statement
required to consolidated refers to FRS 127, the
vehicles also will show in Co. A. in others word, it
shows that the vehicle consider not sold. Implication
of this notion, profit RM5,000 should be remove in
Co. A and also vehicles in Co. B. In addition,
depreciation should be adjusted which is remove
RM1,000 from profit and loss account and
depreciation account. Table 4 shows the results after
adjusted.

38
 However, in accounting perspective for treatment,
there is very important to ensure the profit is
considered as realization profit. If not the profit
should be remove/cancelling.
Example 2 Answer 2
Holding = 35,000/50,000 x 100% = 70%
Balance Sheet as at 31 December 2019 Co. B unit of Ord. shares = RM50,000 / RM1.00
A B = 50,000 units
Non-Current Assets Co. A Acquired 35,000 units of Ord. Shares
Land&Building 90,000 90,000 Percentage Holding of Co. A
Machine 92,000 120,000 35,000 / 50,000 x 100% = 70%
Acc Dep (32,000) (47,000)
60,000 73,000 Cost of Control (CCA) 70% -1/1/2019
Investment in B Investment 120,000 Ord. shares 35,000
- Ord Shares 120,000 - (50K x 70%)
Profit &
Cuurent Assets Loss 49,000
Bank 30,000 35,000 (70Kx70%)
Inventories 30,000 35,000 Goodwill 36,000
Debtors 10,000 27,000 120,000 120,000
340,000 260,000
Paid-up Capital Co. B sold to Co. A
Ord Shares@RM1.00 100,000 50,000 L & B = Cost RM40,000
Profit&Loss Account 200,000 150,000 Selling Price = RM60,000
Profit & Loss = RM60,000 – RM40,000
Current Liabilities = RM20,000 – Co. B
Creditor 40,000 60,000
340,000 260,000 Co. A sold to Co. B
Additional Information Machine
Net Book Value RM20,000
On 1 Jan 2019 A acquired 35,000 ordinary share of Depreciation = (2,000) (20,000 /10 years)
B when the profit and loss Acct was RM70,000.
During 2019, there are two related party transaction Profit loss
occur as below: Selling Price = RM30,000
a.. B sold a piece of land carrying valued RM40,000 NBV = (RM20,000)
for RM60,000. Profit & Loss = RM10,000 - Co. A
b. A sold to B machine of book value of RM20,000
for RM30,000. Depreciation policy of the Co. B
group is straight line and 10% per annum. Depreciation = RM3,000 (RM30,000 / 10 years)

You are required Cons. Profit & Loss Acct

a. Cost of control A B A B
b. Consolidated Profit&Loss Account CCA - 49,000 Bal 200,000 150,000
c. Minority Interest L&B 20,000 Acc
d. Consolidated Balance Sheet as at 31 Dec Mach 10,000 Dep 1,000
2019 MI 39,0004
Bal 191,000 42,000
Note: 201,000 150,000 201,000 150,000
Two RPTs occur between holding and subsidiary.
These two transactions involve with large of amount Statement of Comprehensive Income as at…….
where it should look deeply on that transaction. Gross Profit 20,000
Possibly holding use their power and control put a Before sales
pressure on subsidiary to sell the asset with that Depreciation (2,000)
amount. Otherwise subsidiary may be forced to buy EBIT 18,000
the land with the price. Possibly the price already
fixed by holding. Statement of Comprehensive Income as at…….
Gross Profit 20,000

4MI take consideration after balance RM150,000 profit deduct

L&B profit. This occur during the accounting period.

39
 After Sales Inventories 20,000 20,000
Depreciation (3,000) Debtors 22,000 16,000
EBIT 17,000 188,000 94,000
Paid-up Capital
Ord Shares@RM1.00 100,000 40,000
Minority Shareholder (30%) Profit&Loss Account 70,000 35,000
Balance 54,000 Ord. Shares 15,000
Profit & 39,000 Current Liabilities
Loss Creditor 18,000 19,000
(150k-20K) 188,000 94,000
x 30% Additional Information
54,000 54,000
On 1 Jan 2013 A acquired 75% ordinary share of B
Co. A when the profit and loss Acct was RM70,000.
Consolidated Balance Sheet as at 31 During 2013, there are two related party transaction
December 2019 occur as below:
Non-Current Assets a.. A sold to B vehicle at price RM20,000 at 1 Jan
Land&Building 160,000 2013. Cost of vehicle is RM35,000 and
Machine 124,0005 accumulated depreciation is RM21,000.
Depreciation policy of the group is straight line
Goodwill 36,000 and 20% per annum.
Cuurent Assets b. RM3,300 of A inventory was received from B
Bank 65,000 at cost plus 50% profit.
Inventories 65,000
Debtors 37,000 You are required
487,000 a. Cost of control
Paid-up Capital b. Consolidated Profit&Loss Account
Ord Shares@RM1.00 100,000 c. Minority Interest
Profit&Loss Account 233,000 d. Consolidated Balance Sheet as at 31 Dec
2013
MI 54,000
Current Liabilities
Creditors 100,000 Note
487,000
Note: A become holding with acquire 75% of shares from
MI only can get their profit after adjustment. For any B. A sell vehicles to B, consider as RPTs because A
unrealis profit and exceed depreciation should be and B have relationship as holding and subsidiary
remove. If we look on CCA, RM49,000 in P & L throughout power and control. In addition, Student
Account does not deduct form RM150,000 because should look at vehicle transaction where it has value
it`s become balance at the beginning. RM10,000 for cost and accumulated depreciation. In order to gain
unrealis profit from RPTs L&B - double entry (P&L the profit the sell price should minus with book
and L&B). However, for RPTs Machine 2 double valued. Furthermore, depreciation affected profit
entry (P&L and Mach-RM20,00) and (Accmu. and loss account so the adjustment should be done.
Depreaction and P&L –RM1,000)
Question 1

Balance Sheet as at 31 December 2013

A B
Non-Current Assets
Vehicle 120,000 50,000
Acc Dep (40,000) (12,000)
80,000 38,000
Investment in B
- Ord Shares 46,000 -

Cuurent Assets
Bank 20,000 20,000

5Machine acct (balance RM92,000+RM120,000 – RM10,000

unrealis profit) – Acct depreciation (RM32,000+47,000 –
RM1,000)

40
 3. Goodwill is to written off immediately.

You are required to prepare:

a. Cost of control account
b. Minority interest account
RPTs - REVALUATION OF NON-CURRENT c. Consolidated Profit & Loss Account
ASSETS d. Consolidated statement of financial
This transaction is more to revaluation for existing position as at 31 December 2014
assets. During acquisition possibly the assets
revaluation consider as RPTs. Land & Building – Co B
Ord Shares (units) in Co. B = RM400,000/RM2
Example 1 = 200,000 units (100%)
Given below are the statements of financial position
Co. A acquire ord shares = 160,000 units
of A Bhd and B Bhd as at 31 December 2014. Percentage holding =160,000/200,000 x 100%
= 80%
A Bhd B Bhd 350,000 400,000
NON CURRENT Increase = RM50,000 x 80% = RM40,000
ASSET
Land and building 650,000 350,000 Dr Land & Building 50,000
(cost)
Cr Capital Reserves 50,000
Plant and machinery 300,000 200,000
(-)Accumulated (30,000) (20,000)
depreciation Land & Building
Investment in B Bhd 330,000 - Balance 350,000 Balance b/d 400,00
160,000 unit Ordinary b/d
Shares Capital 50,000
Investment in B RM 15,000 - Reserves
15000 9% Debentures 400,000 400,000

CURRENT ASSET
Inventories 75,000 36,860
Debtors 65,000 40,000 Cost of Control Account (80%)
Rent receivable-B 20,000 - Investment 330,000 Ordinary 320,000
Bank 49,000 46,000 Shares
1,474,000 652,860 Debentures 15,000 Debentures 15,000
FINANCE BY Profit & 32,000 Land 40,000
Ord shares of 1,000,000 400,000 (revalue
Loss
RM2/each 200,000 100,000 80% x
Account
10% Pref shares of 50,000)
RM1/each 20,000 27,000
Goodwill 2,000
9% Debentures 200,000 53,430
377,000 377,000
Profit & Loss Account

CURRENT Minority Interest

LIABILITIES - 20,000 CBS 200,686 Ordinary 80,000
Rent payable-A 4,000 2,430 Shares
Debentures interest Preference 100,000
payable 50,000 50,000 Shares
Creditors 1,474,000 652,860 Land (revalue 10,000
(20% x 50,000)
Additional information: Profit & Loss 10,686
1. A Bhd acquired 160,000 units of the ordinary Account
shares and RM15,000 9% Debentures of B Bhd 200,686 200,686
on 1 January 2009 when the statement of
comprehensive income of Sari had a debit
Consolidated Profit & Loss Account
balance of RM 40,000. A Bhd B Bhd A Bhd B Bhd
2. On the date of acquisition, A Bhd revaluated G/willl 2,000 Bal 200,000 53,430
land and building of B to RM400,000. B Bhd MI 10,686 CCA 32,000
CBS 198,000 74,744
did not adjust its book.
200,000 85,430 200,000 85,430

41
 A Bhd Group
Consolidated statement of financial position as at
31 December 2014
Noncurrent asset
Land & building (650k+350k+50k) 1,050,000
(650 + 400K)
Plant & machinery (300k+200k) 500,000
(-) Acc depreciation (30k+20k) (50,000)
1,500,000
Current asset
Inventories (75,000+36,860) 111,860
Debtors (65,000+40,000) 105,000
Bank (49,000+46,000) 95,000
1,811,860
Finance by:
Ordinary shares @ RM2.00 each 1,000,000
Preference shares @ RM1.00 each 200,000
9% debentures (20,000+27,000- 32,000
15,000)
Profit & Loss Account 272,744
Minority interest 200,686

Current liabilities
Debentures interest payable 6,430
(4,000+2,430)
Creditors (50,000+50,000) 100,000
1,811,860

42
 Part of investment Revenue
RPTs – DIVIDEND
Purposefully company make an investment is to gain A. Dividend Pre-Acquisition Profit
better dividend throughout better profit. However, Example 1 (part of investment)
there is very important to identify profit status Balance Sheet as at 31 December 2013
especially during acquisition. Profit may consider as A B
part of investment when the company declare Non-Current Assets
dividend and at the same time we just bought share Vehicle 40,000 15,000
and become majority shareholder or holding
company. This dividend cannot be declared by Investment in B
holding as profit which is recorded in credit side at - Ord Shares 27,000 -
profit and loss account. Whereas the dividend should Less Dividen (3,600)6
record in credit side at Cost of control account which 23,400
is affected the goodwill. Dividend received after Cuurent Assets
acquisition in the current year will record as revenue Inventories 20,000 10,000
in credit side in profit and loss account. This is links Debtors 26,000 15,000
with the purpose of holding to make money 46,000 25,000
throughout investment. 109,400 40,000
Paid-up Capital
Dividend pay by subsidiary to holding shows Ord Shares@RM1.00 50,000 20,000
existing of RPTs. This is because the holding acquire Profit&Loss Account 39,400 10,0007
shares in subsidiary and required by subsidiary to
pay dividend when company shows better profit. Current Liabilities
Shareholding Creditor 20,000 10,000
109,400 40,000
80% On 1 Jan 2013 A acquired 18,000 unit ordinary share
Co. A Co. B of B when the profit and loss Acct was RM14,000
and out of this, B paid a dividend of RM4,000.

You are required

a. Cost of control
35% 20% b. Consolidated Profit&Loss Account
c. Minority Interest
Co. C Co. D d. Consolidated Balance Sheet as at 31 Dec
2013
Answer 1
Dividend paid between Shareholding
Total unit shares in Co. B = RM20,000 / RM1.00
80% = 20,000 units
Co. A Co. B
18,000 units / 20,000 unis x 100% = 90%

Profit & Loss in B (1/12013)

= 14,000
35% 20% Dividend = 4,000
Balance P & L = 14,000 – 4,000
Co. C Co. D = 10,000

Concept = Dividend Paid throughout Profit & Loss

Diagram1 Profit & Loss

Profit 14,000

Dividend Dividend
Pre-Acquisition Post-Acquisition Dividen = 4,000 balance = 10,000
Profit Profit

6 Dividend = 90% x RM4,000 7 Profit & Loss Account = RM20,000 – RM4,000

43
 90%
Cost of control acct RM5,000
Dividend
Cost of Control (CCA) - 90%
Investment 27,000 Ord. shares 18,000 Diagram above shows that net investment is
Negative 3,600 Profit & RM60,000 (RM65,000-RM5,000). Mainly reason is,
Goodwill Loss 9,000 A make payment RM65,000 for investment and due
P&L _Div 3,600 to A majority shareholder in B so they will receive
dividend. B declare dividend, RM5,000 awarded to
30,600 30,600 A. To consider as income, the business should run
Cons. Profit & Loss Acct for certain period. Therefore, pre-acquisition
A B A B dividend was received after date of acquisition does
CCA - 9,000 Bal 39,400 10,000 not declare as income.
MI 1,000 -ve
good 3,600 Question 1
will Balance Sheet as at 31 December 2013
Bal 43,000 A B
43,000 10,000 43,000 10,000 Non-Current Assets
Vehicle 40,000 25,000
Minority Shareholder (10%) Machine 60,000 15,000
Balance 3,000 Ord. Shares 2,000 Investment in B
Profit&Loss 1,000 - Ord Shares 38,000 -
Less Dividen (3,000)8
3,000 3,000 35,000
Cuurent Assets
Consolidated Balance Sheet as at 31 Bank 15,000 1,000
December 2013 Inventories 25,000 15,000
Non-Current Assets Debtors 25,000 10,000
Vehicle 55,000 65,000 26,000
200,000 66,000
Cuurent Assets Paid-up Capital
Inventories 30,000 Ord Shares@RM1.00 100,000 40,000
Debtors 41,000 Profit&Loss Account 60,000 16,000
126,000 Current Liabilities
Paid-up Capital Creditor 40,000 10,000
Ord Shares@RM1.00 50,000 200,000 66,000
Profit&Loss Account 43,000 On 1 Jan 2013 A acquired 30,000 unit ordinary share
of B when the profit and loss Acct was RM20,000
MI 3,000 and out of this, B paid a dividend of RM4,000.
Current Liabilities
Creditors 30,000 You are required
126,000 a. Cost of control
However, sometimes holding may declare the pre- b. Consolidated Profit&Loss Account
acquisition dividend as income and was recorded on c. Minority Interest
credit side in P&L. The accounting treatment is d. Consolidated Balance Sheet as at 31 Dec
wrong and need for adjustment such as: 2013
Dr. P&L xxx Holding Bhd may declare the dividend from pre-
Cr CCA xxx acquisition as revenue and credited into profit and
Why Pre-acquisition does not treat as income loss account. If this thing happen, you are required
because after acquire process was completed where to makes adjustment throughout profit and loss
holding make payment as known as investment and account.
become majority shareholder.. So means that
holding paid for the investment. After that, no longer
holding receives dividend for the investment.

Holding Investment
RM65,000
A B Subsidiary

8 Dividend = 75% x RM4,000

44
 Example 2 (declare as revenue)
Question 2 Balance Sheet as at 31 December 2013
A B
Balance Sheet as at 31 December 2013 Non-Current Assets
A B Machine 85,000 70,000
Non-Current Assets Investment in B
Vehicle 240,000 260,000 - Ord Shares 45,000 -
Machine 240,000 280,000
Cuurent Assets
Investment in B 570,000 Bank 15,000 10,000
Less Dividend (30,400) - Inventories 10,000 10,000
539,600 Debtors 15,000 15,000
40,000 35,000
Cuurent Assets 170,000 105,000
Bank 10,000 40,000 Paid-up Capital
Inventories 10,000 30,000 Ord Shares@RM1.00 100,000 50,000
Debtors 10,400 30,000 Profit&Loss Account 60,000 35,000
1,050,000 640,000 Current Liabilities
Paid-up Capital Creditor 10,000 20,000
Ord Shares@RM1.00 630,000 450,000 170,000 105,000
Profit&Loss Account 250,000 150,000
On 1 Jan 2013 A acquired 30,000 unit ordinary share
Current Liabilities of B when the profit and loss Acct was RM15,000
Creditor 170,000 40,000 and out of this, B paid a dividend of RM5,000. The
1,050,000 640,000 dividend received by A had been credited to its profit
and loss account.
On 1 Jan 2013 A acquired 360,000 unit ordinary
share of B when the profit and loss Acct was You are required
RM190,000 and out of this, B paid a dividend of a. Cost of control
RM40,000. b. Consolidated Profit&Loss Account
c. Minority Interest
You are required d. Consolidated Balance Sheet as at 31 Dec
a. Cost of control 2013
b. Consolidated Profit&Loss Account
c. Minority Interest
d. Consolidated Balance Sheet as at 31 Dec Cost of Control (CCA) 60%
2013 Investment 45,000 Ord. shares 30,000
Profit &
Loss 6,000
P&L -A 3,000
Goodwill 6,000
45,000 45,000

Cons. Profit & Loss Acct

A B A B
CCA 3,000 6,000 Bal 60,000 35,000
MI 14,000

Bal 57,000 15,000

60,000 35,000 60,000 35,000

Minority Shareholder (40%)

Balance 34,000 Ord. Shares 20,000
Profit & Loss 14,000

34,000 34,000

45
 Consolidated Balance Sheet as at 31 Dividend Post acquisition profit
December 2013 Better profit will bring better return via dividend
Non-Current Assets towards shareholder. Therefore, payout dividend is
Machine 155,000 related with profitability. After closing the financial,
board of director will decide the percent of dividend
Goodwill 6,000 should be pay to shareholder. If pay out dividend is
Cuurent Assets not able to satisfy shareholder, possibly investment
Bank 25,000 will withdraw and reinvest to other company.
Inventories 20,000
Debtors 30,000 Holding invest into subsidiary to gain power and
236,000 control. Besides that holding also part of shareholder
Paid-up Capital who has right towards their investment to get better
Ord Shares@RM1.00 100,000 return via better dividend. Dividend pay by
Profit&Loss Account 72,000 shareholder become part of revenue for holding. In
accounting perspective treatment related with payout
MI 34,000 dividend after subsidiary declared the dividend.
Current Liabilities Book of Holding
Creditors 30,000
236,000 Dr dividend receivable xxx
Cr P&L xxx
Question 1
However, if subsidiary declare the dividend but not
Balance Sheet as at 31 December 2013 recorded by both parties and accounting treatment is:
A B Book of subsidiary
Non-Current Assets
Vehicle 45,000 40,000 Dr P&L xxx
Furniture 40,000 30,000 Cr proposed dividend xxx
Investment in B
- Ord Shares 45,000 - Dr Proposed dividend xxx
Cr Div Receivable xxx
Cuurent Assets
Bank 10,000 15,000 Note: holding will get the dividend base on
Inventories 15,000 10,000 shareholding. Subsidiary declare dividend as
Debtors 15,000 10,000 consider as 100% which is divided between holding
40,000 35,000 and subsidiary base on the shareholding.
170,000 105,000
Paid-up Capital Besides holding, minority shareholder also has right
Ord Shares@RM1.00 100,000 50,000 towards dividend because of investment that they
Profit&Loss Account 60,000 35,000 made. In accounting treatment minority will gain the
Current Liabilities dividend and subsidiary need to recorded amount
Creditor 10,000 20,000 pay to minority shareholder.
170,000 105,000
Simple words that we can say are dividend pay by
On 1 Jan 2013 A acquired 40,000 unit ordinary share subsidiary throughout profit towards shareholder. In
of B when the profit and loss Acct was RM20,000 this case shareholder will divide into two, holding
and out of this, B paid a dividend of RM10,000. The and minority shareholder. Both parties will receive
dividend received by A had been credited to its profit amount of dividend base on their shareholding.
and loss account.

You are required

a. Cost of control
b. Consolidated Profit&Loss Account
c. Minority Interest
d. Consolidated Balance Sheet as at 31 Dec
2013

46
 c) Consolidated Statement of
DIVIDEND PAY TO SHAREHOLDER FOR comprehensive income
ORD. SHARES BASE ON P & L ACCOUNT d) Consolidated Statement of financial
Example 1 (Both recorded) position of A Group as at 31 December
A Bhd. Acquired ordinary shares and 10% 2012
preference shares in B Bhd at 1 January 2019.
Answer 4
Statement of Financial Position for both companies
is as follows: Shareholding (%) – RM400,000 /RM1.00
- 400,000 units
Statement of Financial Position as at
31/12/2019 300,000 / 400,000 x 100% = 75%
A Bhd B Bhd
Non Current Asset Cost of Control Account
Land and building 135,000 170,000
Investment 390,000 Ordinary 300,000
Machinery 105,000 185,000
Shares
Investment in B Bhd:
Preference 50,000
300,000 unit 340,000
Shares
Ordinary Shares
50,000 unit, 10% 50,000 P&L (35k x 26,250
Pref Shares 75%)
Goodwill 13,750
Current Asset 390,000 390,000
Cash in hand 160,000 90,000
Inventory 150,000 120,000 Minority shareholder (Non_controlling
Trade receivable 90,000 100,000 shareholder)
1,030,000 665,000 CBS 161,130 Ordinary 100,000
Current Liabilities Shares
Trade payable (100,000) (100,000) Preference 50,000
Proposed Dividends (40,000) (20,000) Shares
890,000 545,000 P&L (44,520 x 11,130
Financed by 25%)
Ordinary Shares @ 600,000 400,000 161,130 161,130
RM 1.00 each share
10% Preference 200,000 100,000 Consolidated Profit & Loss Acct
Shares A B A B
Retained Profit 90,000 45,000 CCA 26,250 B/b 90,000 45,000
890,000 545,000
MI 11,130 Div 15,0009
Additional information:- Inv - 480
unrealis
profit
1. The balance of statement of comprehensive CBS 105,000 7,140
income at the acquisition date was a credit 105,000 45,000 105,000 45,000
balance of RM35,000.
2. The board of directors in B Bhd had declared
5% Ordinary shares dividend and it has been
recorded. 5% x 400,000 = 20,000 60% x 4,000 = 2,400 ( inventories – 31/12)
3. On 30th September 2019, B Bhd sold
inventories valued at RM4,000 to A Bhd. B Profir over 2,400?
Bhd invoiced the goods at cost plus 25%. At
the year ended 2019, 60% of these goods still 25 / 125 (100 +25) x 2,400 = 480
remain in the closing inventories of A Bhd. (unrealis Profit – B)

Required to prepare:

a) Cost of control Account

b) Minority Interest
Account

9 RM20,000 (proposed Div - A) *75%

47
 Umar Bhd
Consolidated Profit & Loss Account as at
31/12/2012 Example 2 (Both not recorded post dividend)
Non Current Asset
Land and building 305,000 Balance Sheet as at 31 December 2019
Machinery 290,000 A B
Goodwill 13,750 Non-Current Assets
Vehicle 200,000 140,000
Current Asset Machine 500,000 300,000
Cash in hand 250,000 Furniture 100,000 60,000
Inventory ( 150k x 120k – 480) 269,520
Trade receivable 190,000 Investment in B
- Ord Shares 420,000 -
Current Liabilities
Trade payable (200,000) Cuurent Assets
Proposed Ordinary Shares Bank 20,000 30,000
Dividends (40k+20k – 15k) (45,000) Inventories 20,000 30,000
1,073,270 Debtors 40,000 40,000
1,300,000 600,000
Financed by Paid-up Capital
Ordinary Shares @ RM1.00 each 600,000 Ord Shares@RM1.00 900,000 450,000
share Profit&Loss Account 400,000 150,000
10% Preference Shares 200,000 1,300,000 600,000
Retained Profit 112,140
MI 161,130 On 1 Jan 2019 A acquired 360,000 unit ordinary
1,073,270 share of B when the profit and loss Acct was
RM50,000.

Both company A and B declared a dividend of

ordinary shares of 5% and 4% respectively. This
item has not been recorded.

You are required

a. Cost of control
b. Consolidated Profit&Loss Account
c. Minority Interest
d. Consolidated Balance Sheet as at 31 Dec
2019

Shareholding (%)

RM450,000 / RM1.00 = 450,000

360,000 / 450,000 x 100% = 80%

48
 6,000 6,000

Consolidated Balance Sheet as at 31

Note: December 2013
Non-Current Assets
• Dividend pay by B to A: Vehicle 340,000
= RM150,000 (P&L) x 4% Machine 800,000
= RM6,000 x 80% (Holding) Furniture 160,000
= RM4,800
• Balance sheet does not shows the proposed Goodwill 20,000
dividend and additional information Cuurent Assets
mention the dividend is not recorded then Bank 50,000
the dividend is consider as proposed Inventories 50,000
dividend. No payment is happened. Debtors 80,000
1,500,000
Paid-up Capital
Ord Shares@RM1.00 900,000
Answer Profit&Loss Account 460,000
Shareholding: 360,000/450,000 x 100% = 80%
MI 118,800
Cost of Control (CCA) 80% Current Liabilities
Investment 420,000 Ord. shares 360,000 Proposed Dividend 21,20010
– in B P&L 40,000 1,500,000
Goodwill 20,000 If the proposed dividend shown in balance sheet
420,000 420,000 (before adjustment) after deduct from P &L account.

Cons. Profit & Loss Acct Example stated at above is not show proposed in
balance sheet so we need to deduct from P & L
A B A B Account.
CCA - 40,000 Bal 400,000 150,000
Bank- Bank Example 3
Div 20,000 6,000 -div 4,800
A B
MI 28,800
Bal. 384,800 75,200 Non-current asset
404,800 150,00 404,800 150,000 Vehicle 40,000 30,000
0
Dividend Paid: (Expenses) Investment - Bhd
Co. A = 400,000 x 5% = 20,000 32,000 shares 38,000 -
Co. B = 150,000 x 4% = 6,000
Current assets
Received Dividend (Revenue) Debtors 16,500 23,000
Co. A = 6,000 x 80% = 4,800 94,500 53,000
Issued and paid
Ordinary shares@RM1.00 60,000 40,000
Minority Shareholder (20%) Profit&Loss 30,000 10,000
Balance 118,800 Ord. Shares 90,000
Profit&Loss 28,800 Current Liabilities
Creditors 1,000 1,000
118,800 118,800 Proposed Dividend 3,500 2,000
94,500 53,000
Receivable Div (a)
Profit&Loss 4,800 Pro. Div. 4,800 A Acquired 80% of shares in B when the latter profit
4,800 4,800 and loss was RM4,000. It is assumed that A has not
taken into account the dividend proposed,

Proposed Dividend (b) Answer

Rec Div 4,800 Profit & 6,000 Cost of Control (CCA) 80%
Loss Investment 38,000 Ord. shares 32,000
Balance 1,200 – in B P&L 3,200

10 RM20,000 (A) + RM1,200 (B) = RM21,200

49
 Goodwill 2,800 Current Liabilities
38,000 38,000 Creditors 2,000 1,000
Proposed Dividend 1,500 500
Cons. Profit & Loss Acct 32,500 20,500
A B A B
CCA - 3,200 Bal 30,000 10,000 When A acquired the shares in B, the profit and loss
MI 2,000 div account of B was RM2,000 (Dr). There was no
Reciev 1,600 balance in the Reserve Account. A has not yet taken
Bal. 31,600 4,800 credit for the dividend proposed by B.
31,600 10,000 31,600 10,000
You are required
Minority Shareholder (20%) a. Cost of control
Balance 10,000 Ord. Shares 8,000 b. Consolidated Profit&Loss Account
Profit&Loss 2,000 c. Minority Interest
10,000 10,000 d. Consolidated Balance Sheet as at 31 Dec
Receivable Div 2013
P&L-A 1,600 Pro. Div. 1,600
1,600 1,600

Proposed Dividend (b)

Rec Div 1,600 Balance 2,000
Balance 400
2000 2,000
Answer
Balance Sheet as at 31 December 2013
A
Cost of Control (CCA) 80%
Non-current asset
Vehicle 70,000 Investment 6,000 Ord. shares 7,500
– in B
Goodwill 2,800 P &L 1,500 l
7,500 7,500
Current assets
Debtors 39,500 Cons. Profit & Loss Acct
112,300 A B A B
Issued and paid MI 750 Bal 6,000 3,000
Ordinary shares@RM1.00 60,000 div
Profit&Loss 36,400 Reciev 375
Bal. 6,375 3,750 CCA 1,500
Minority Interest 10,000 6,375 4,500 6,375 4,500
Current Liabilities
Creditors 2,000 Minority Shareholder (20%)
Balance 4,750 Ord. Shares 2,500
Proposed Dividend 3,900
112,300 Profit&Loss 750
Reserve 1,500
Question 1 4,750 4,750
A B
Non-current asset Receivable Div
Vehicle 13,000 10,500 P&L-A 375 Pro. Div. 375
375 375
Investment - Bhd
7,500 shares 6,000 - Proposed Dividend (b)
Rec Div 375 Balance 500
Current assets Balance 125
Debtors 13,500 10,000 500 500
32,500 20,500
Issued and paid
Ordinary shares@RM1.00 15,000 10,000 Balance Sheet as at 31 December 2013
Profit&Loss 6,000 3,000 A
Reserve 8,000 6,000 Non-current asset
Vehicle 23,500

50
 b. On 1 January 2014 A Bhd bought
machinery from B Bhd at the price of
Current assets RM20,000 (book value RM16,000).
Debtors 23,500 Depreciation rate for plant and machinery
47,000 is 10% per annum
Issued and paid c. 40% of closing inventory of B Bhd were
Ordinary shares@RM1.00 15,000 pyrchased from A Bhd. A Bhd invoiced at
Profit&Loss 10,125 cost plus 20% mark-up
Reserve 12,500 d. 55% of debtors balance of A Bhd was due
from B Bhd
Minority Interest 4,750 e. On 31 December 2014, B Bhd declared
Current Liabilities year-end dividend on ordinary shares of
Creditors 3,000 10% which is not recorded yet.
Proposed Dividend 1,625 f. Goodwill is to be written of immediately (if
47,000 any)

You are required to prepare the following:

1. Cost of control account
2. Minority interest account
3. Consolidated Profit and Loss Account
4. Consolidated statement financial

Comprehensive Example Answer

Given Below are the statements of financial position
of A Bhd and B Bhd as at 31 December 2014
A B Cost of Control (CCA) 75%
Non-current asset Investment 70,000 Ord. shares 45,000
Land & Building 95,000 60,000 –ve g/will 11,000 10% deben 30,000
Vehicles 45,000 30,000 P&L 6,000
Plant & Machinery 30,000 20,000 81,000 81,000
Investment:
30,000 Ord. Shares 40,000 - Minority Shareholder (25%)
8% Debenture 30,000 - Balance 17,125 Ord. Shares 15,000
Profit&Loss 2,125
70,000 17,125 17,125
Current assets
Debtors 17,500 6,400 Cons. Profit & Loss Acct
Inventory 12,000 6,000 A B A B
Bank 10,000 9,600 CCA - 6,000 Bal 76,500 18,500
Interest – Debenture 3,000 - MI 2,125 Dep –
282,500 132,000 P&M 4,000 P &M 1,000
Issued and paid Inven 1,000 Div 4,500
Ordinary shares@RM1.50 100,000 60,000 Div 6,000 G/will 11,00
8% Pref Shares@RM1.00 50,000 - Bal. 92,000 375
Profit&Loss 76,500 18,500 31,600 10,000 93,000 18,500
8% Debenture 40,000 35,000
A Bhd
Current Liabilities Consolidated Balance Sheet as at 31 December
Creditors 12,000 15,000 2014
Debenture interest pay. 4,000 3,500 Non-current asset
282,500 132,000 Land & Building 155,000
Additional information: Vehicles 75,000
a. A Bhd acquired ordinary shares and 10% Plant & Machinery 47,000
debentures of B Bhd on 1 January 2013
when the profit and loss account of B Bhd Current assets
had a credit balance of RM8,000 Debtors 14,275
Inventory 17,000

51
Bank 19,600
327,875
Issued and paid
Ordinary shares@RM1.50 100,000
8% Pref Shares@RM1.00 50,000
Profit&Loss 92,375

Minority Interest 17,125

8% Debenture 45,000

Current Liabilities
Creditors 17,375
Debenture interest pay. 4,500
Dividend 1,500
327,875

52