Capitalism 2 and Capitalism Lab Forum

as network problem, I can not upload my pictures, so just a few words to describe them

a simple model, one factory and one department store. Factory purchase raw material from seaport, after manufacturing, internal sales to department store.

Last month, revenue of factory is 19,706, and revenue of store is 28,386(BTW, its purchase cost is 21,325, why not 19,706, contains turnover tax?), so total revenue is 48,092, it is the same number displayed in corporate income statement.

But, revenue of factory 19,706 does not make real profit, in accounting treatment, internal sales/purchase will be offset in consolidate income statement, so the total revenue should be 28,386, not the sum of each entity.

some recommendations
1. internal sales/cost offset in income statement
2. if inventories related to internal transactions do not sales out, these inventories' value in consolidate balance sheet should be deducted, then add cost by the same number
3. more complex legal structure. In current game, only 2 levels of companies allowed, one parent company holds each company's. It would be wonderful if we can let subsidiary invest other company(let a factory build another factory/store or just purchase share), thus we get 3 levels of companies. Of course, this may result in further adjustment in balance sheet, about Long-term equity investments and assets/liabilities offset.

I don't know about your recommendations but:

revenue of factory is 19,706, and revenue of store is 28,386(BTW, its purchase cost is 21,325, why not 19,706, contains turnover tax?)

This is very probably freight costs, there are no taxes in capitalism as far as i know.

RafaelF82 wrote:I don't know about your recommendations but:

revenue of factory is 19,706, and revenue of store is 28,386(BTW, its purchase cost is 21,325, why not 19,706, contains turnover tax?)

This is very probably freight costs, there are no taxes in capitalism as far as i know.

but in income statement of a company, the item below purchase cost is freight cost, so this diffierence may not be freight cost, unless there are two freight costs, one from seller, another from buyer, and all paid by this company.

and what my recommendation means, for each company, all sales/costs can be recognized in its own income statement, but for a company group, only sales/costs from outside can be recognized. If not so, transactions within group will lead to inflated profits in the consolidate income statement. As the model I mentioned, the factory and the department store are one company group, sales of factory and purchase cost of department are transaction within this group, for this group, assets/liabilities are not changed, just inventories transferred from factory to store and cash transferred from store to factory, no profit for this group.