The existence of a parent company and a subsidiary requires special accounting procedures.

Question

Quizplus · Accepted Answer

A parent company and subsidiary must prepare consolidated financial statements that combine the financial activities of both entities. Additionally, the parent company must account for its investment in the subsidiary using the equity method or cost method. There may also be intercompany transactions that require elimination in the consolidated financial statements. All of these accounting procedures are necessary to accurately reflect the financial position and performance of both the parent and subsidiary as a single economic entity.

The Existence of a Parent Company and a Subsidiary Requires