How to Consolidate Financial Statements

Consolidated financial statement means to make one set of financial statement of holding company and its all subsidiary companies. This financial statement is more informative than unconsolidated financial statements because this financial statement provides more information of utilization of investors' fund. If subsidiary company misuses the fund, its effect will be on the equity of holding company. So, it is the responsibility of holding or parent company to prepare and show consolidated income statement and balance sheet.  So, today, we discuss the steps to consolidate the financial statement.

1. To Make Consolidated Income Statement 

All the expenses of parent company and subsidiary company are added. All the incomes of parent company and holding company are added. If holding company buys or sell anything to subsidiary company. All these transactions are not added in consolidated income statement. Only outside buying and selling will be recorded.

2. To Make Consolidated Balance Sheet 

For this, we will add all the assets of holding company and its subsidiary companies except inter-investment. It  means, we will not show the investment of holding company in subsidiary company and subsidiary company in holding company. We also add all the liabilities of holding company and subsidiary company except the share capital of subsidiary company in holding company. We also show the share of minority interest in consolidated balance sheet's liability side.

Related : Consolidated Financial Statement of Group of Companies 


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Accounting Education: How to Consolidate Financial Statements
How to Consolidate Financial Statements
Accounting Education
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