What method sequences are needed to eliminate intercompany profit in inventory?

Upload multiple journal entries using a single Excel file.

What method sequences are needed to eliminate intercompany profit in inventory? Note: There are 2 correct answers to this question.
A . Eliminate net income for the buyer
B . Reverse the elimination of net income of the buyer
C . Eliminate net income for the seller
D . Reverse the elimination of net income of the seller

View Answer

Answer: CD

Explanation:

According to the SAP S/4HANA Finance for Group Reporting Associates documents1, method sequences that are needed to eliminate intercompany profit in inventory are:

Eliminate net income for the seller: This method sequence eliminates the net income of the seller unit that is derived from intercompany sales of inventory. This method sequence reduces the seller’s net income and equity by the amount of intercompany profit in inventory.

Reverse the elimination of net income of the seller: This method sequence reverses the elimination of net income of the seller unit that was done in the previous method sequence. This method sequence restores the seller’s net income and equity to their original values before elimination.