Different business transactions between a parent company and its subsidiary involve a profit or loss. Consolidated financial statements compute the financial position and the results of the two operations of two or more subsidiaries as if they were one company, so the unrealized profits or losses in these intercompany transactions need to be eliminated.
General Ledger accounts that will require elimination entries must also be available to the appropriate elimination subsidiaries.
Elimination Journal Entries are regular journal entries, except they’re associated with the elimination subsidiary.
- In Essence, netting out the income and expenses between subsidiaries.
- Elimination Journal Entries can be memorized, imported, reversed, and deferred just like any other JE.