Consolidated financial statements are prepared when a parent-subsidiary relationship exists, in recognition of the accounting principle or concept of:

Question

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The entity concept in accounting states that the financial activities of a business should be kept separate from those of its owners or other businesses. When a parent company controls a subsidiary, consolidated financial statements are prepared to present the financial position and results of operations of the parent and its subsidiaries as a single economic entity, in line with the entity concept. This reflects the economic reality of the group acting as a single entity, despite the separate legal entities involved.

Consolidated Financial Statements Are Prepared When a Parent-Subsidiary Relationship Exists