The process of preparing Consolidated Financial Statements involves the elimination of inter-company 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.

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Kiran Jaiswal · Accepted Answer

Final Answer : C, Explanation :  The elimination of inter-company transactions during the consolidation process is not recorded in the books of either the parent company or the subsidiary. Instead, these adjustments are made on the consolidation working papers to ensure that the consolidated financial statements reflect the financial position and results of the group as a single entity, without the distortion caused by inter-company transactions.

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