The process of preparing consolidated financial statements requires that:
A) adjusting journal entries be recorded in the ledger accounts of the parent only.
B) adjusting journal entries be recorded in the ledger accounts of the subsidiaries only.
C) accruals of expenses and revenues be recorded directly into the retained earnings account of the parent entity.
D) no adjustments be made to the individual financial statements or ledger accounts of the entities in the group.

Question

Quizplus · Accepted Answer

The process of preparing consolidated financial statements involves combining the financial statements of the parent company and its subsidiaries without making adjustments to the individual financial statements or ledger accounts of the entities in the group. Adjustments for consolidation purposes are made in the consolidation working papers, not in the individual books of the entities.

The Process of Preparing Consolidated Financial Statements Requires That