Consolidating entries

18-Nov-2020 00:41

Both concepts are distinct -- one refers to a process, whereas the other is the final result.A company that owns more than 50 percent equity in another firm must consolidate, or combine, its results with the subsidiary’s data.

Intercompany elimination refers to the process for removal of transactions between companies included in a group in the preparation of consolidated accounts.Examples include a balance sheet, statement of cash flows, statement of owners’ equity and a statement of profit and loss.Consolidating financial statements is the accounting process that ultimately leads to consolidated financial statements.Company XYZ is the most important shareholder in company B and carries significant clout in the firm’s decision-making processes.

At the end of the year, company XYZ’s accountants calculate the firm’s equity in its subsidiaries.In the business environment, this type of arrangement does not exist, and regulatory guidelines require that affiliated companies consolidate their assets and financial statements.