Answered: cess of preparing Consolidated…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter6: Audit Evidence

Section: Chapter Questions

Problem 15CYBK

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Question

The process of preparing Consolidated Financial Statements involves the elimination of intercompany transactions between a Parent Company and its subsidiary. Where would these
entries be recorded?
A. On the Parent's books only.
B. On the Subsidiary's books.
C. The entries are not recorded in the books of either company. The entries are only
made on the working papers.
D. The effect of any inter-company transaction must be reflected on the books of both
companies

Definition Definition Financial journal in which only cash-related transactions are recorded. Cash transactions are posted chronologically in the cash book, which is also called a subsidiary book. All the cash receipts are recorded on the debit side and all the cash payments are recorded on the credit side. An important point to remember is that the cash book never shows a credit balance; only a debit balance is shown in the cash book.

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