The Elimination Way Of Intra-company Transaction Of Inventory In Consolidated Financial Statements

While the Reform and Opening continuously extend in our country,national economy has make a great progress and a lot of big company and enterprise groups have appeared .Especially our country have already joined the WTO now and facing the strong international and local pressure of competition and the great inner motive force of development,running an enterprise group on a commercial basis is a general trend. So consolidated financial statements of enterprise seem to be more and more important and it is the urgent matter of the moment that consolidated financial statements should be standardized in the accounting system and the accounting standards for business enterprises.Consolidated financial statements are regarded as one of the three difficult problems in the fields of financial accounting and the elimination way of intra-company transaction of inventory is a difficult points in consolidated financial statements. The regulations for the elimination way of intra-company transaction of inventory in the existing system of accounts in our country are not complete and go so far to be wrong. Accounting practices related are not scientific. This paper not only systematically discuss the theory of the elimination way of intra-company transaction of inventory in all conditions and put forward and verify the two elimination ways(the analytic way of elimination and the synthetic way of elimination) for the first time and make up the incompletion of the existing accounting systems(as a part of them,the elimination way of allowance for marked diminution in value of inventory fill in the gaps in the accounting system),but discuss the application of the elimination way in the practice making consolidated financial statements and make the elimination way in the practice more scientific and more normal.This text totally is divided into four parts:(namely four chapter) The first part introduction. Totally discussed three problems. The first:discuss the importance with the urgent researching the consolidated financial statements. The second:Selection of the theory of the consolidated financial statements. This text state that entity theory should be used in our country in the future. The third:discuss the present situation of the theory and practice related .The second part:discussed the elimination way of intra-company transaction (not included allowance for diminution in value of inventory). According to the relationship between internal selling price and internal selling expenses,the intra-company transaction of inventory is divided into three kinds:(1) Internal selling price larger than internal selling expenses. (2) Internal selling price smaller than internal selling expenses. (3) Internal selling price as same as internal selling expenses. This chapter,Section One and Section Two has discussed respectively the elimination way under the first and the second condition above. Section Three has discussed the elimination way when one or more than one conditions above appear at the same time. Section Four,on the basis of discussion of the three sections above,point out the problems in the running accounting system.The third part:Discussed the elimination way of allowance for marked diminution in value of inventory in all conditions in the same way which has been used in the second part.The fourth part:Studied the application of the elimination way to the practice for consolidated financial statements. This primarily discussed those accounts which are demanded,and how to collect and calculate the data which are needed in the elimination way above.The fifth part:Give some suggestions on the basis of the generalization and summation of the text. As I am concerned that the running accounting system in our country should be revised and the two elimination ways of intra-company transaction of invcntory(the analytic way of elimination and the synthetic way of elimination)should be written down in the accounting system.