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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Mutual owing
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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
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.
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