I am compiling the consolidated accounts for the first time. My concern is relating to one particular issue which is how should a I record amounts owed to/from in the consolidated accounts? When doing individual accounts whatever one owes to/from the other goes either in their respective creditors/ debtors. I'll give you an example below:
Company A (Parent), Company B (Sub), Company C (Sub), Company Z (not part of group but is a related party)
- Company B owes £10,000 to Company A
- Company A owes £15,000 to Company C
- Company C owes £12,000 to Company Z
- Company Z owes £3,000 to Company B
How do I record this in consolidated accounts without overstating the creditors/ debtors balance. Do i use eliminating journals? Is the below correct (in column "Consolidated Accounts") to report?
Individual Accounts | Group Balance | Eliminate | Consolidated Accounts | ||||
Company A | Company B | Company C | Company Z | ||||
Debtors | |||||||
Amount owed from group related parties | 10,000 | 3,000 | 15,000 | 12,000 | 28,000 | - 25,000 | 3,000 |
Creditors | |||||||
Amount owed to group related parties | 15,000 | 10,000 | 12,000 | 3,000 | 37,000 | - 25,000 | 12,000 |
Replies (5)
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The inter company balances in the balance sheets of the companies you are consolidating should of course net off to £Nil, and not appear in the consolidated balance sheet at all. Balances due to or from companies you are not consolidating, even where they are related, of course remain in the consolidated balance sheet.
And, just me personally, amounts owed to entities not part of the group are shown as 'other creditors' or 'other debtors' respectively.
(Or, if they have them as an associate, I think 'Amounts owed to participating interestes/joint ventures').
In my world, only group balances are shown within 'amounts owed to group companies'.
And of course, they should eliminate to zero, except when they don't [1]
[1] I've TWO, TWO for blooming hecks sake, clients who insist on subconsolidated accounts, ie, A owns B owns C. A HAS to consolidate, but client insists B also prepares consolidated accounts too.... so I have the perverse situation of preparing a consolidated balance sheet for B, and still have group balances shown in it.
As explained earlier, debtor/creditors from and to subsidiaries would be eliminated from the balance sheet of the consolidated group accounts.
However I believe you would need to include any monies owed to or from company z, being an associate.
In addition, there would be the need for a whole raft of disclosures depending on the financial accounting standards you are using.