How do you do a consolidated balance sheet?

Answer 1

When you have a company that wholly-owns other companies, you have a parent company and subsidiaries. To get a complete financial picture of the company, you want to add all the companies together in consolidated financial statements. To consolidate the balance sheets, you prepare balance sheets in the same format, then add the various line items together. Inter-company items, such as Accounts Receivable/Accounts Payable between the companies are removed via Eliminations. So, for example, if the subsidiary owed the parent money, there would be an elimination (reduction) of that amount in both A/R (from the parent's books) and A/P (from the subsidiary's books. Typically, Each company's Balance Sheet is shown in side-by-side columns with an additional column for eliminations and the total accross each line is the Consolidated Balance Sheet. You only consolidate the Balance Sheet if the subsidiaries are wholly-owned (100%). Similarly, you can prepare a Consolidated Income Statement (if the companies are engaged in similar businesses) with eliminations for any inter-company income and expenses (such as a Management Fee charged by the parent to the subsidiary). If the companies are in different types of businesses, the subsidiary's net income or loss is usually shown as a single line item on the income statement. So, for example, Ford owns Jaguar, both auto manufacturing companies, so you could prepare a consolidated Income Statement. However, Ford also owns Ford Motor Credit, a financing company - so FMC's net income would be a line item on Ford's income statement after calculating Ford's Net Income from operations.