Inter-departmental profit

Hi,
Just wondering what others do to eliminate inter-departmental revenues and expenses when preparing your financial statements? It makes sense that one should exclude these items. An example may be a fleet department charging other departments for the use of the equipment or fuel charge out. Do you use an "eliminations" section on your Statement of Operations By Segment so that the departmental results are not distorted (each department shows its revenue and expenses) but in aggregate it ties out to the Statement of Operations? I have seen the presentation of "eliminations" more so when dealing with a consolidation of more than one legal entity. Thanks

Comments

  • Hi
    We note revenues and expenses in our quarterly reports to council and off on our financial statement.

  • edited November 2019

    Hi Scott

    I wouldn't call it an elimination on consolidation, but internal recoveries are recorded as negative expenses, not revenues. For example: You have equipment expenses totalling 10,000 and you want to charge that to snow clearing 7,000 and ditching 3,000. You already have expenses of $10,000 under equipment mtce. Now you make a journal entry:

    Equipment Mtce - internal recoveries (10,000)
    Snow clearing - equipment charges 7,000
    Ditching - equipment charges 3,000

    Equipment Mtce expense is now net zero and the cost has been transferred to the activities where the equipment was used.

    Susan Meeds, CPA, CGA
    Director of Finance
    Village of Burns Lake

Sign In or Register to comment.