What are the methods of consolidating accounts?

After you stop the annual accounting of a company, it is important to do what is called consolidation of accounts. There are three different methods that we will present to you today.

If it is advisable to use the expertise of an accounting firm to perform this kind of practice, it is still possible to apply these methods yourself.

Consolidation of accounts in the event of exclusive control

When the accounts of an enterprise are managed exclusively by a consolidating company, they must absolutely be integrated. This involves putting together all the accounts of the companies, regardless of the percentage of interest. To do this, we must combine the accounts to define the total amount of the items of assets and liabilities from the balance sheet and then delete the transactions and reciprocal accounts. Then you divide the equity and the result for the year of consolidated companies to distribute these funds. Care must also be taken to remove the shares in the consolidating company.

Consolidation of accounts in the event of joint control

The accounts of an enterprise under the joint control of a consolidating company must use the proportionate consolidation method. The consolidated company's accounts are to be reclassified according to the percentage of interests of the consolidating company. As a result, no minority interest is recognized. To implement this method, the consolidated companies' accounts must be aggregated according to the percentage of consolidated interests of the company so that minority interests do not appear in the balance sheet.