Final answer:
Intercompany sales involve transactions between a parent and subsidiary where goods or assets are sold. The company receives money based on agreed payment terms. These transactions must be accounted for accurately in consolidated financial statements.
Step-by-step explanation:
​Intercompany sales of property between a parent and a subsidiary refers to transactions where one entity sells goods or assets to another entity within the same group of companies. This is a common practice, especially in large corporate structures where the parent company has one or more subsidiaries. The purpose of these transactions can range from internal reorganization, asset consolidation, to strategic financial reporting.
The question of how and when a company obtains money from its sale, particularly in the context of intercompany sales, involves various financial mechanisms. Typically, money is received when the subsidiary company pays the parent company for the goods or assets acquired. The timing of the receipt of money can depend on the payment terms agreed upon between the entities, such as immediate payment, installment payments, or delayed payment terms.
It is also essential to note that intercompany sales must be properly accounted for in the consolidated financial statements of the parent company. Transactions between entities under common control can lead to the elimination of unrealized profit and the need for adjustments to present a fair picture of the financial health and performance of the overall group.