Group accounts are required when a company acquires another company. The first
company is called the holding or parent company and it controls the latter company,
which is called the subsidiary.
Group accounts basically consist of a consolidated balance sheet, which is a balance
sheet that shows the net assets that the Holding Company controls and the
ownership of those assets.
The Group’s Capital and Reserves consist of the holding company’s capital and
reserve and the group share of post-acquisition retained reserves of the subsidiary
company. It also consists of what is called Minority Interest.
The Preparation of the Group’s Consolidated Balance Sheet
you must first make sure at what date the acquisition took place. The reason for this
is to have a clear picture in your mind concerning the events that occurred at the
acquisition date and those of which occurred since.
the next step is to find out whether other parties hold a minority interest of the
subsidiary’s consolidated net assets. This is done by dividing the amount of shares
acquired by the subsidiary’s total share capital. The percentage of minority interest
should be noted down.
when separate calculations of post acquisition profits, goodwill or minority interest
are needed rather than all of them, just take a look at the column of each category
to find out how to calculate it.
Going through the calculations in this manner ensures that the possibility of your
errors is minimal, and if they do occur you can systematically find out where they did.
80% Total of Total Equity
The Purpose of Cost Accounting
Cost accounting is part of management accounting, and its purpose arises due to
the management’s need for specific or more detailed information as oppose to that
provided by financial statements. Hence cost accounting will provide information to
assist the management with planning, control and decision making as well as
accumulating historical costs to establish stock valuations, profits and balance sheet
items. All of this is done with the help of a Management Information System, which is
simply a general term for the computer systems in an enterprise that provide
information for management.
Therefore the key points of cost accounting are: • The recording and analysis of actual costs
• The forecast of future costs
• Cost control
As such, it is necessary to be able to understand the basic cost classifications and
behavior to manage a cost accounting system.
Costs may be classified as either of the following:
1. Direct or Indirect Costs
2. Function Costs
3. Fixed or Variable Costs
4. Product Costs or Period Costs
5. Available or Unavailable
6. Controllable, Uncontrollable, or Discretionary Costs
Direct or Indirect Costs
A direct cost is a cost that can be traced in full to the product, service or department
that is being coasted. These costs consist of direct labor, direct materials, and any
other direct costs.
Whereas an indirect cost is a cost that is incurred in the course of making a product,
providing a service or running a department, but which cannot be traced directly
and in full to the product, service or department. These costs consist of the following:
a) Production overheads: indirect materials, indirect wages and indirect
b) Administration overheads: e.g. depreciation and office salaries
c) Selling Overheads: e.g. commissions, advertising, market research, sales
d) Distribution Overheads: e.g. cost of packing cases, insurance charges.
The two definitions mean that every product, service or department will incur a direct
and indirect cost. Furthermor