An eliminating entry is required both when a subsidiary owes a parent company and when the parent owes the subsidiary.

Question

Quizplus · Accepted Answer

This is true. Eliminating entries are required to ensure that transactions between a parent company and its subsidiary are accurately reflected in consolidated financial statements. If the subsidiary owes the parent company, an eliminating entry is required to eliminate the intercompany receivable on the parent's books and the intercompany payable on the subsidiary's books. Similarly, if the parent owes the subsidiary, an eliminating entry is required to eliminate the intercompany payable on the parent's books and the intercompany receivable on the subsidiary's books.

An Eliminating Entry Is Required Both When a Subsidiary Owes