consolidation accounting a combines the accounts of the pare

consolidation accounting

a) combines the accounts of the parent company and those of the subsidiary companies.

b) eliminates all liabilities.

c) reports the receivables and payables of the parent company only.

d) all of the above

Solution

The correct answer is option is A. Combines the account of parent company and subsidiary company.

Consolidation refers to combining all the assets and liability and other financial items of two or more entity .In consolidation all accounts and items of subsidiary company combined with the parent company . consolidation is done if the parent company hold more than 50 percent share of subsidiary company.