Methods of consolidating subsidiaries
Maintaining such accounts payable and receivable in the consolidated financial statement would be as good as saying that the group owes itself money, a situation that is practically unrealistic.Eliminate inter-company investments -- that is, is the parent’s shareholding stakes in the subsidiaries.Treat such sales as transfer of inventory between stores owned by the same entity.You should actually acknowledge that the transferred items merely switched premises and not ownership. He has over 40 years of experience in Business & Finance. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas.Consolidated financial statements consist of the income statement, balance sheet and cash flow statements of a parent company and the subsidiaries under its ownership or administrative control.
To eliminate the entries for account payables and receivables, debit and credit the amount in the consolidated accounts payable and consolidated accounts receivable, respectively.Many large companies are partially or entirely made up of smaller companies that they've acquired throughout the years.