From the standpoint of accounting theory,which of the following statements is the best justification for the preparation of consolidated financial statements?
A)In substance the companies are separate,but in form the companies are one entity.
B)In substance the companies are one entity,but in form they are separate.
C)In substance and form the companies are one entity.
D)In substance and form the companies are separate entities.

Question

Quizplus · Accepted Answer

According to accounting theory, the best justification for the preparation of consolidated financial statements is that "in substance the companies are one entity but in form, they are separate." This means that the companies have significant intercompany transactions and relationships that make it difficult to understand their financial position without consolidating the results. Consolidating financial statements allows stakeholders to evaluate the financial position of the company as a whole, including its subsidiaries and affiliated companies.

From the Standpoint of Accounting Theory,which of the Following Statements