During the current year, a partly-owned subsidiary has made a transfer from retained earnings to a general reserve. Which of the following lines would appear in the NCI journal relating to the current year transfer?
A) Dr NCI.
B) Dr Retained earnings.
C) Cr General reserve.
D) Cr Transfer to general reserve.

Question

Quizplus · Accepted Answer

When a subsidiary makes a transfer from retained earnings to a general reserve, this would decrease its retained earnings and increase the general reserve. As the NCI (non-controlling interest) only represents a portion of the subsidiary's equity, it would not be recorded in the NCI journal. Therefore, the line that would appear in the NCI journal relating to the current year transfer would be to credit (Cr) the transfer to general reserve. The correct journal entry would be:
Dr General Reserve
Cr Retained Earnings (of the subsidiary)

During the Current Year, a Partly-Owned Subsidiary Has Made a Transfer