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Incorporation of branch balances in HO books at year-end requires:
ATreating each branch line as a separate company
BNo incorporation needed
COnly incorporating cash balances
DAdding branch P&L items to HO P&L and branch BS items to HO BS, then eliminating mutual transactions
Answer & Solution
Correct answer: D. Adding branch P&L items to HO P&L and branch BS items to HO BS, then eliminating mutual transactions
1. Step 1: Per Ch 15 learning outcomes, branch balances are incorporated by adding line items and eliminating mutual (HO ↔ Branch) transactions.
2. Step 2: Result: consolidated financial statements representing the whole entity.
3. Step 3: Hence (B).
_Source: ICAI BoS CA Inter Paper 1, Ch 15 "Accounting for Branches including Foreign Branches"_