What
is parent company
When a company controls the
company, then the controlling company known as parent company and the company is
being controlled.
How
parent companies achieve control over subsidiary?
Parent entity can achieve
control over subsidiary in number of ways, which includes more than fifty
percent share holding or ability to govern the financial policy, or ability to
appoint the majority of director, or ability to poll majority votes in board of
director meetings.
How
parent prepare consolidated accounts?
The investment in subsidiary
is reflected in term of asset and liabilities in consolidated financial statement
i.e. adding of parent and subsidiary asset and liabilities in consolidated
financial statement or accounts.
Does all elements of subsidiary financial statement are combined?
No, only asset and liabilities
are combined (added). Share capital of subsidiary and reserve are not added. Subsidiary
share capital does not appear in consolidated financial statement.
How
many set of account prepared by parent company?
Parent company prepares
two set of accounts i.e. individual accounts of parents and consolidated
accounts. Consolidated financial statement reflects the group performance.
What
is difference between individual accounts and consolidated accounts?
In individual accounts
investment in subsidiary appears at cost, when in consolidated accounts, this
investment is reflected in assets and liabilities. The reserves are also
adjusted in the consolidation.
