Process consolidating financial statements
While preparing a consolidated financial statement, there are two basic procedures that need to be followed: first, you cancel out all the items that are accounted as an asset in one company and a liability in another, and then add together all uncancelled items.
There are two main type of items that cancel each other out from the consolidated statement of financial position.
This accounting software program is suitable for small businesses such as restaurants, retailers, distributors and brokerage agencies that have separate units employing between 10 to 50 employees.
Consolidation of financial statements is a requirement of the IAS 27 of the International Financial Reporting Standards.
Accounts payable, purchases, cash, bank and accounts receivable are some of the inter-unit transactions that are cancelled out, because the business records profits or losses only when it transacts with customers.Also, post debit entries of the wages, rent, insurance and sundry expenses for each of your business units to be able to determine the net profits of the business.Click the appropriate links on the menu of the ledger module to export (extract) and print the consolidated financial reports of your business.Until those goods are sold to an outsider company, the group has unrealised profit.
The users of financial statements of a parent company are typically concerned with and are required to be educated about, the results of operations and financial position of not only the company itself but also of that group together.
For example, if a company buys shares of another company worth ,000 for ,000, we conclude that there is a goodwill worth or ,000.