Procedures of Elimination

If 2 companies are there, they have maintained separate chart of accounts, how can you consolidate their activities? What are the procedures of elimination during consolidation of financial statements?

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  • Dec 26th, 2010

If two companies accounts are separate and are now to be consolidated, we can follow the method of accounting of amalgamation by nature of merger or purchase.
In case of the consolidated balance sheet and P&L accounts. We shall eliminate inter company debtors and creditors, intercompany investments, profit margin on closing stock when sold to the other company.
The share capital shall be either the total share capital in case of merged companies.
or in the case of purchase, the new share capital shall be the amt of shares issued at face value plus the share capital of the purchasing company.
The general reserves,goodwill, P&L account balances and the pre-acquisition profits shall be adjusted in the consolidated balance sheet.
Minority interest should be shown separately.

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