Asked by Brandon Underhill on Jun 08, 2024
Verified
Explain why cash will never be adjusted in consolidation journal entries.
Consolidation Journal Entries
Accounting entries used to adjust and combine the financial statements of a parent company and its subsidiaries for reporting purposes.
Cash Adjustment
A modification of the cash balance reported in financial statements to reflect transactions or changes not yet captured in the cash account.
- Elucidate the reasoning for not modifying cash balances in consolidation entries.
Verified Answer
EB
Edward BishopJun 09, 2024
Final Answer :
Cash:
- The text makes the point that one of the rules of consolidation is 'never adjust cash'.
- Although intragroup transactions affect the cash of group members,the group total cash will always equal the sum of the separate cash accounts of group members.
- The text makes the point that one of the rules of consolidation is 'never adjust cash'.
- Although intragroup transactions affect the cash of group members,the group total cash will always equal the sum of the separate cash accounts of group members.
Learning Objectives
- Elucidate the reasoning for not modifying cash balances in consolidation entries.
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