Archive | Holding Companies

Holding Company: Advantages and Disadvantages | Accounting

In this article we will discuss about the advantages and disadvantages of holding company. The advantages of holding company are in brief: (1) A holding company is a legal personality and it is very easy to form a holding company because we simply have to purchase the controlling interest of other companies. (2) Each member […]

Holding Companies: Problems and Solutions | Accounting

Here is a compilation of top nine problems on holding companies with its relevant solutions. Problem 1 (Wholly Owned Subsidiary): Note: Investment which is made by the Holding Company in the form of shares of subsidiary company is replaced by the subsidiary company’s assets and liabilities. Problem 2 (Goodwill): The following are the Balance Sheet […]

Consolidation of Profit and Loss Accounts (With Illustrations)

Apart from the usual items of gains, incomes, losses and expenses which will appear in the profit and loss accounts of both the holding and the subsidiary companies and which will therefore be aggregated, some adjustments will be required. The following are the most important: (1) The profit of the subsidiary company arising before the […]

Bonus Shares out of Pre-acquisition and Post Acquisition Profits

Issue of bonus shares by the subsidiary company increases the number of shares held by the holding company without changing the cost of investment. While preparing a consolidated balance sheet, its treatment will differ depending upon the source from where the bonus shares have been issued by the subsidiary company. Bonus Shares out of Pre-acquisition […]

Balance Sheets and Profit and Loss Accounts | Holding Companies

In England the holding company is required to present, in addition to its normal balance sheet, a consolidated balance sheet covering the holding company and its subsidiaries and a consolidated profit and loss account. In India, the law does not insist on consolidated accounts but there is no doubt that for a clear picture, it […]

Dividends from Subsidiary Company

In this article we will discuss about the Dividend from Subsidiary Company Pre-acquisition and Post Acquisition Profits along with Solved Illustrations. Dividend received by the holding company from its subsidiary out of pre-acquisition profits is treated as capital receipt; the journal entry for its record being as follows:— Dividend received from the subsidiary company out […]

Foreign Subsidiaries (With Illustrations) | Accounting

Foreign subsidiary companies should be consolidated along with other subsidiary companies in the usual manner. This will be possible only if the trial balance of the foreign subsidiary is first converted into ‘home’ currency. The rules for conversion are the same as for foreign branches. There may, however, be subsidiary companies in some countries where […]

Un-realized Profits (With Illustration) | Holding Companies

The below mentioned article provides a short note on the Un-realised Profits arising from Transaction between the Holding Company and Subsidiary Company. Usually, there will be transactions between the holding company and the subsidiary company involving profits and losses. Suppose, H Ltd. (the holding company) buys from S Ltd. (the subsidiary company) goods of the […]

Consolidated Financial Statement | Holding Companies

In this article we will discuss about the Consolidated Financial Statement:- 1. Meaning of Consolidated Financial Statement 2. Objective of Consolidated Financial Statement 3. Scope 4. Definitions 5. Presentation 6. Procedures 7. Transitional Provisions. Contents: Meaning of Consolidated Financial Statement Objective of Consolidated Financial Statement Scope of Consolidated Financial Statement Definitions of Consolidated Financial Statement […]

Preference Shares of a Subsidiary Company

In this article we will discuss about the Accounting Treatment Relating to Preference Shares of a Subsidiary Company. A subsidiary company may have issued equity shares as well as preference shares. In such a case, irrespective of the percentage of preference shares held by outsiders, the minority interest will include the paid up value of […]

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