Capitalization of Current Account of Subsidiary

Aahmedtalal268y ago

Question: There is a parent company ABC, which has a 100% owned subsidiary XYZ. ABC maintains a current account of XYZ which include the financial loans and some other expenses paid to XYZ. Is is allowed to ABC to capitalize the current account of XYZ into equity. Kindly provide reasons as well.

P2-D2Tutor8y ago#1

Hi, What do you mean by "capitalize the current account of XYZ into equity"? That doesn't make any sense to me sorry. If there is a current account between the two companies then it is an intra-group balance that is eliminated on consolidation. Thanks

Aahmedtalal268y ago#2

Yes it is an intra-group balance, which is eliminated during consolidation but can we re-class the amount to investment account. The effect will show the increased investment of ABC to XYZ In, XYZ there equity will be increased to close the payable to ABC.

P2-D2Tutor8y ago#3

Hi, Why would you re-class it to an investment account? None of what you're talking about makes particular sense in all honesty. Thanks

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