Question

Why is it necessary to debit the equity accounts, and credit the investment account (asset) as...

Why is it necessary to debit the equity accounts, and credit the investment account (asset) as part of a consolidation?

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

As we know, Consolidation refers to the process when one company acquires the other company. The company which owns the other company is called as holding company and on the other hand, other Company is called subsidiary company.

As a part of consolidation, it is necessary to debit all equity accounts as consolidated balance sheet shows both company equity accounts and assets also. So, all the equity accounts like liabilities, minority interest and capital are debited as it is a kind of liability for the company and it is also necessary to credit the investment account as it is a kind of profit for the company and whenever company needs money, this investment can be converted into cash by selling it. So, it is credited .

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
What is the debit and credit formula for each of the five account types(Asset, liability, equity,...
What is the debit and credit formula for each of the five account types(Asset, liability, equity, revenue, expense)?(Please type your answer)
A credit entry A. increases asset and expense accounts, or decreases liability, equity, and revenue accounts...
A credit entry A. increases asset and expense accounts, or decreases liability, equity, and revenue accounts B. Is recorded on the left side of a T-account C. Decreases asset and expense accounts, or increases liability, equity, and revenue account D. Decreases asset, expense and revenue accounts. E. Increases the withdrawals account
for accumulation depreciation accounts, if they're an asset account then why does it have a normal...
for accumulation depreciation accounts, if they're an asset account then why does it have a normal credit balance? (or is it a normal debit balance)
Which of the following correctly identifies normal balances of accounts? Assets Debit Liabilities Credit Owner's Equity...
Which of the following correctly identifies normal balances of accounts? Assets Debit Liabilities Credit Owner's Equity Credit Revenues Debit Expenses Credit Assets Debit Liabilities Credit Owner's Equity Credit Revenues Credit Expenses Credit Assets Credit Liabilities Debit Owner's Equity Debit Revenues Credit Expenses Debit Assets Debit Liabilities Credit Owner's Equity Credit Revenues Credit Expenses Debit
Date Accounts involved in transaction? Classification of the account? Increasing or Decreasing? Debit or Credit the...
Date Accounts involved in transaction? Classification of the account? Increasing or Decreasing? Debit or Credit the Account? Amount? July 2 Received $14,000 (cash) contribution from Brett Lawrence, owner, in exchange for capital. Tell me what happen to the business today in your own words? Example: The business got cash from the owner. Cash Asset Increasing Debit $          12,000 London, Capital Capital Increasing Credit $          12,000 July 4 Paid (cash) for utilities expense of $370. July 5 Purchased equipment on account,...
A journal entry to record a payment on account will include a A. debit to Accounts...
A journal entry to record a payment on account will include a A. debit to Accounts Receivable. B. credit to Accounts Receivable. C. debit to Accounts Payable. D. credit to Accounts Payable. can u explain to me why not the D answer?
In a capital account, explain which side (debit or credit) will decrease and which side will...
In a capital account, explain which side (debit or credit) will decrease and which side will increase.  Provide an example (just make one up) of a transaction with a T-account for each side of the transaction showing which type of accounts will receive the debit and credit (e.g., asset, cash, accounts payable, equipment, revenue, etc.).
For each item described: Identify the type of account (Asset, Liability, Equity, Revenue or Gain, Expense...
For each item described: Identify the type of account (Asset, Liability, Equity, Revenue or Gain, Expense or Loss), normal balance (Debit, Credit), financial statement (Balance Sheet, Income Statement), and whether the account is closed at the end of the period (Yes, No) by selecting the letter that best describes those attributes. If an account is a contra account, the answer will show the account type in parentheses.  Answer items may be used once, more than once, or not at all.   ...
Classify each of the accounts from Stance Company as Asset (A), Liability (L), Stockholders Equity (SE),...
Classify each of the accounts from Stance Company as Asset (A), Liability (L), Stockholders Equity (SE), Revenue (R), Expense (E), or Dividend (D) and also indicate the typical balance in the account as Debit (D) or Credit (C)   Prepaid Rent Depreciation Investment Accrued Expense Sales Common Stock Note Payable Accumulated Depreciation Cost of Goods Sold Unearned Revenue Accounts Receivable Dividends Utilities Paid in Capital Retained Earnings
For each of the following accounts, indicate the effect of a debit or a credit on...
For each of the following accounts, indicate the effect of a debit or a credit on the account and the normal balance. Debit Effect Credit Effect Normal Balance a. Accounts Payable. select between increase and decrease Increase Decrease select between increase and decrease Increase Decrease select between credit and debit Credit Debit b. Advertising Expense. select between increase and decrease Decrease Increase select between increase and decrease Decrease Increase select between credit and debit Debit Credit c. Service Revenue. select...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT