In this image what is the meaning of point 2?
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Hi Ayushi,
This point is not clear because if you are debiting PL ( Employees cost) in Parent book then how in the heading it is mentioned that Subsidiary to its employees.
But as per my understanding if you think Employees are providing services to P Ltd and Subsidiary is issuing its own shares. Then sub points are making sense.
P Ltd will consider the shares of subsidiary as Dividend income.
In the books of P Ltd
PL ( Employees cost) XX
To Dividend income. XX
And in the books of S ltd
Retained earnings ( Dvd distribution) XX
To SBP reserve XX
And Cash settled from P Ltd point of view because P Ltd is not issuing its own shares and P Ltd is also not having obligation to settle the share based transaction.
I hope it resolves your doubt.
Regards.
Sambhav