Paul Limited provided an advance of $150 000 to its subsidiary Caitlin Limited. On consolidation, the following adjustment is needed in relation to this intragroup advance:

A) no adjustment is needed.
B) DR Advances to Caitlin Ltd $150 000 CR Advances from Paul Ltd $150 000
C) DR Advances from Paul Ltd $150 000 CR Advances to Caitlin Ltd $150 000
D) DR Advances from Paul Ltd $150 000 CR Cash $150 000

Question

Jenelle Lizama · Accepted Answer

Final Answer : C, Explanation :  The correct adjustment to be made in relation to the intragroup advance from Paul Limited to Caitlin Limited is to debit Advances from Paul Ltd and credit Advances to Caitlin Ltd, as this represents the flow of funds from the parent company to the subsidiary. Option B would be incorrect as the debit and credit accounts would be reversed. Option D is also incorrect as there is no cash involved in this transaction, only an advance between related parties.

Definitions

Learning Objectives

Learning Objectives

Related questions