Consolidating financial statements eliminating entries
Often, when people “upgrade” from Excel to a real system, they discover that what they thought was working, wasn’t. Setting Up Intercompany Costs In our example, widgets were sold at the same price to outside wholesalers and the company-owned retailer. There are all kinds of reasons management may want different intercompany prices.Some we’ve heard include: If you’re operating within one country, you have a fair amount of leverage (with some restrictions – talk to your tax guys) on allocating your profit.Even if all your companies don’t use the same GL system, you can still make it work by writing an interface between ledgers.
Every government in the world wants to collect more tax. Companies go through consolidation because outsiders don’t care about all your inter-company back and forth.Often, business leaders look only at their individual statements to go about their business.At the end of the day, consolidation is really about addition – adding in balancing entries. Here are some of the complexities we see regularly: 1.In the context of financial accounting, consolidation is the aggregation of the financial statements of two or more companies under the same ownership into a consolidated financial statement.To really grasp consolidation, you need to understand that in the outside world, no one cares about money that’s traded back and forth between different companies under the same ownership.