Question

6. Preparation of consolidated balance
sheet *​

Answer 1

Answer:

A consolidated balance sheet is usually prepared by the business operating as a group of companies that have more than one subsidiary and it portrays the combined details of assets and liabilitie

Explanation:

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Answer 2

Explanation:

How to Prepare a Consolidated Balance Sheet

Consolidated balance sheets must be prepared according to the same rules and accounting methods used across the parent company and its subsidiaries. Generally accepted accounting principles, sometimes known as GAAP, must be adhered to at all times. Before proceeding with your consolidated balance sheet or a worksheet, you should carefully check all your reference information. The accuracy of your input is paramount in ensuring that the balance sheet itself is correct.

When preparing the consolidated balance sheet, it’s important to adjust the figures related to the subsidiaries assets so that they reflect their fair market value. Also, revenue of the parent company that is also an expense of the subsidiary should be left out because the net change is $0.

It may be helpful when preparing a consolidated balance sheet, to start with a worksheet. To create the worksheet, you will need the financials of the parent company and its subsidiary to be initially separate. Make a list of all the asset accounts and all the liability accounts including their values. Then, add together all the company’s assets and all its liabilities. Follow this same procedure for the subsidiary business. You should have one column for each unit of the company.

Next, you will need two columns for assets and liabilities that can be eliminated due to duplication. The debits and credits you eliminate will need to balance out to zero. These eliminated figures are listed in the assets or liabilities for both the company and the subsidiary. Including both would create duplication in the consolidated balance sheet. For instance, if your business and subsidiary both make use of a particular machine for production, you should not include it as an asset twice. This amount would need to be removed from one location so as not to duplicate numbers and throw off your total.

In the right-hand column of your worksheet, you should list the consolidated trial balance for each category you’ve listed. In this column, find the sum of all amounts in that row, being sure to add and subtract debits and credits from your duplication column appropriately.

Once you’ve found the total of your consolidated trial balance by category, you are ready to move on to your consolidated balance sheet. The only numbers that you should transfer over are those that you listed in the right-hand column of your worksheet. These should represent the total numbers of assets, liabilities and owner’s equity for both your parent company and its subsidiary.

To create a consolidated balance sheet, first document the name of the company, its subsidiary and the date at the top of your chart. In the left-hand column, you’ll want a section for assets, liabilities and equity. The numbers that you include should match those from your worksheet’s consolidated trial balances.

Once you have finished inputting the numbers from your worksheet, check your consolidated balance sheet. Your total assets, liabilities and equity should match those of your parent company plus those of your subsidiary, minus any duplicate items you eliminated.