Introduction to Accounting Essay Example | Topics and Well Written Essays - 500 words

Introduction to Accounting - hear ExampleGroups are treated as a single entity for the purpose of showing the financial gear up of the range of companies including sustain (holding) company, its subsidiaries, associated companies and other investments such as joint ventures. These financial statements are known as consolidated financial statements because all the accounts of the companies are consolidated to form just one set of accounts. This is make for the better management of accounts, tax cuts, measurement of the size and extent of the business and also it is a exigency in some cases (Brennan & Pierce, 2003). The case discussed below is per USGAAP treatment of group accounts. (Definitions, 2008)When the company owns or purchases 50% or more of the outstanding common stock, the purchasing company has control over the acquired company. Control in this consideration is defined as ability to direct policies and management. In this type of relationship the controlling company i s the put forward and the controlled company is the subsidiary. The parent company needs to issue consolidated financial statements at the end of the form to reflect this relationship. Consolidated financial statements show the parent and the subsidiary as one single entity. During the year, the parent company can use the equity or the cost method to account for its investment in the subsidiary. Each company keeps separate books.