How to Consolidate Accounting Statements
The Financial Accounting Standards Board sets forth rules and regulations for how businesses must account for their business operations and other business interests. If a business owns or shares an interest in another company, a consolidated financial statement needs to be made available to banks, shareholders and in the event of an audit, the Internal Revenue Service. Consolidated financial statements allow a complete picture of the financial viability of a business.
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Things You'll Need
- Financials for all companies to be consolidated
- Columnar pad or spreadsheet software
Instructions
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1
Complete a balance sheet and income statement for each of the businesses that need to be consolidated. To ensure accurate records, financial statements should only be completed after month-end close and after all general ledger accounts have been reconciled.
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2
Create a set of blank consolidated financial statements on a columnar pad or in spreadsheet software based on the accounts contained on the individual financial statements. If you need to create a summary consolidated accounting statement, then combine accounts wherever possible. For example, the checking account balances from all companies to be consolidated would be entered in one line called "Checking Account" on a consolidated balance sheet. On a consolidated income statement, you might create a line entitled "Gross Income from Operations" and place the gross revenue from all companies to be consolidated in that line. If you want a detailed consolidated financial statement, then you need to list unique accounts separately.
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3
Add the amounts for each line item on the financials together for the companies to be consolidated and enter the total for each line item in the consolidated financial statement.
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Verify that you've captured all the necessary information. Add the net income total for all consolidated companies together and make sure it equals the net income on the consolidated income statement. Total assets, liabilities and owner's equity on the balance sheets and compare them to the consolidate balance sheet totals. If you have an error, review your work and make the necessary corrections before distributing the financial statements.
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Tips & Warnings
Consolidated financial statements can be automatically generated by many available accounting software packages. If you will need to generate consolidated financial statements on a regular basis, consider investing in an accounting package that can create customized consolidated financial statements.
