Paul Limited provided an advance of $150 000 to its subsidiary Caitlin Limited. On consolidation, the following adjustment is needed in relation to this intragroup advance:

Question

Quizplus · Accepted Answer

The correct adjustment to be made in relation to the intragroup advance from Paul Limited to Caitlin Limited is to debit Advances from Paul Ltd and credit Advances to Caitlin Ltd, as this represents the flow of funds from the parent company to the subsidiary. Option B would be incorrect as the debit and credit accounts would be reversed. Option D is also incorrect as there is no cash involved in this transaction, only an advance between related parties.

Paul Limited Provided an Advance of $150 000 to Its