What will Financial Consolidation and Close (FCCS) do when adding a new member that is an expense type account under a parent that is set as an income type account?

When a new member, designated as an expense type account, is added under a parent set as an income type account, the behavior of the system is crucial for maintaining the integrity of financial reporting. In this case, expenses are considered reductions to overall income when consolidating financial data. Therefore, amounts consolidated from the expense account will effectively subtract from the total amounts that are linked to the income parent.

This aspect of financial consolidation is fundamental. Income accounts typically represent inflows of resources, while expense accounts represent outflows. When consolidating financial statements, it is essential for the financial system to adhere to the accounting convention that recognizes expenses as reducing net income. Therefore, adding a new expense account under an income parent leads to a subtraction effect on the consolidated income figure.

The option stating that this setting will subtract amounts consolidated to the parent correctly reflects this principle. This ensures that the financial statement presents an accurate depiction of the entity’s net results by properly accounting for expenses against income.