As always, I admire your deep knowledge and experience and thanks for this.
The idea was to have normal Revenue account in the selling account to post the sale price to the buying company (this will include the margin).
From what you are suggesting, we can have another GL account, also in Revenue category in the selling company to record the margin -raised in the form of a charge.-is this correct?
So, the selling company would recognise the margin in a separate and identifiable account.
As an example, one company sells to another IC in the group at $17 per unit 100 units (where the cost is $15 per unit).
So, the revenue is recorded at $1500 (cost) and $200 recorded against another Revenue charge account.
The buying company records the cost at $1700 for 100 items and during the period sells 80 units. At the end of period, the buying company will have 20 units at a cost of $17 = $340. However, of this $40 is unrealised margin for the consolidated entity.
While the separation of margin at the time of inter company sale can be thus tracked and offset against the higher cost of purchase in buying company, not sure how to handle the unrealised margin on closing stock on hand.
Looking forward to your insights here and thanks again.
regards
