In preparing consolidated financial statements,intercompany receivables and payables must be eliminated because they do not represent amounts due to or receivable from parties outside the consolidated entity.

Question

Quizplus · Accepted Answer

Intercompany receivables and payables represent transactions within the consolidated entity and therefore cannot be included in the consolidated financial statements as they offset each other. Eliminating these balances ensures that the consolidated financial statements only reflect transactions with external parties.

In Preparing Consolidated Financial Statements,intercompany Receivables and Payables Must Be