Slide 1

INCOME FROM SUBSIDIARY

 Slide 2

Income from Subsidiary

1. Interest income
2. Dividend income

Interest Income (Debenture interests)

a. S has not provided for the interests

b. S has provided but P has not
accounted for its share of interests
income
c. Both P & S have recorded the
interests

Example

S has in issue 10% RM100,000 debenture

of which RM40,000 is held by its parent
company.

a. S has not provided for the second

half-years interests
 Slide 3

In S
Debenture interest payable: 10% x
100,000 x = 5,000
i) Dr P & L (S) 5,000
Cr Deb int payable (S) 5,000
In P
Ps share: 40% x 5,000 = 2,000
ii) Dr Deb int receivable (P) 2,000
Cr P & L (P) 2,000
On consolidation
iii) Dr Deb int pay (S) 2,000
Cr Deb int rec (P) 2,000

b. S has provided but P has not

accounted for its share of interests
income
Provide entries (ii) and (iii)

c. Both P & S have recorded the

interests
Only provide entry (iii)
 Slide 4

Dividends from S

i) Ordinary dividends declared by the

directors
ii) Preference dividends so long as S has
sufficient profits it must first pay out
the dividends due to the preference
shareholders

3 possible situations (applicable to both

ord & pref shares)

1. S has not provided for the dividends

2. S has provided for the dividend, but P
has not accounted for its share of
dividends receivable from S
3. Both P and S have recorded the
dividends
 Slide 5

Example

S has 200,000 RM1 ordinary shares in

issue. P acquired 75% of these shares some
years ago. As at year-end, directors of S
declared a 10% dividend on ordinary
shares.

1. S has not provided for the

dividends

In S

Dividends payable: 200,000 x RM1 x

10% = 20,000

(a) Dr P & L (S) 20,000

Cr Ord div payable (S) 20,000

In P

Ps share: 75% x 20,000 = 15,000

 Slide 6

(b) Dr Ord div receivable (P) 15,000

Cr P & L (P) 15,000

On consolidation

(c) Dr Ord div pay (S) 20,000

Cr Ord div rec (P) 15,000
Cr Ord div pay to NCI 5,000

2. S has provided, but P has not

accounted for its share of dividends
receivable from S

Provide in P entry (b)

Consolidation adjustment entry (c)

3. Both P and S have recorded the

dividends

Provide consolidation adjustment

entry (c)