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Mutual owing

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What is meant by mutual owing ? Why it is deducted from asset and liability side of consolidated balancesheet of its subsidiary.

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2 Replies

sivaram (Asst Mgr-Taxation) (6918 Points)
Replied 10 February 2012

Debtors owes some money to creditors

creditors owes money to debtors

both are eliminated in a group transaction on consolidated balance sheet by passing entry creditors a/c dr to debtors

Jithin (Learner) (1057 Points)
Replied 10 February 2012

Mutual Owing:Any amount due to a subsidiary co. from its holding co. or any amount due to a holding co. from its subsidiary co.

Reason for deducting mutual owings: When u prepare consolidated balance sheet, u have to actually treat the holding co. & its subsidiary as a single entity. The owings between holding co. & its subsidiary doesnt have any effect on the combined assets & liabilities of the holding co. & its subsidiary. Such owings just inflate the debtors & creditors, & should be deducted. U have to only include the owings to & from outsiders.