CHAPTER-I

INTRODUCTION
The preparation of consolidated financial statement of the group comprising
holding company and all its subsidiaries is mandatory with effect from the year ending 31st
March, 2003. The principles and procedures for preparation of consolidated financial statement
are laid down in the Accounting standard 21 (AS 21) issued by the ICAI. The standard is
applicable to all the enterprises that prepare consolidated financial statements. It is applicable
by virtue of SEBI guidelines to listed companies. The consolidated financial statements shall be
presented in the same format as that of the parent company.
The consolidated financial statements would include the following:
a)
Balance sheet;
b)
Profit and loss Account;
c)
Notes to Accounts;
d)
Cash Flow Statement (if the parent company presents its own cash flow statement );
e)
Segment Reporting.
Consolidated financial statements are prepared in addition to separate financial statements of
the parent and its subsidiaries. Consolidated statements should be prepared for both domestic as
well as foreign subsidiaries.

HOLDING COMPANY
Holding company is the company which holds either all or majority of the
shares of the other company. These shares are held in order to exercise control over the other
company. The holding company device was mainly used to further the combination movement
in order to eliminate competition and to establish a monopoly or near monopoly state. Such a

monopoly or near monopoly state can also be established with help of merger schemes like
Amalgamation or Absorption. But the disadvantage of merger scheme is that, the merged
company will have to be liquidated, as a result of which it will lose its separate and independent
existence. This is not the case with holding company device
Holding of shares is to purchase the shares and own them. Thus what is
important here is to purchase the shares of that other company. As the intention here is to
exercise the control over the management of that other company, w hat is essential here is to
have 51% or more voting power. It may be pointed out that some disadvantage also follow with
holding majority of voting power like, fraudulent manipulation of accounts oppression of
majority, shareholders exploiting that other company to the advantage of holding company etc.

SUBSIDIARY COMPANY
The company whose shares are held is called as a subsidiary company. The
subsidiary companies can either be partly owned or wholly owned subsidiaries.
A wholly of partly owned subsidiary is one in which all the shares are owned by
holding company.
2

In case of partly owned subsidiary, only the majority of shares are owned by
holding company. The owners of the remaining shares are called as Minority Shareholders.
Their interest in the Net Assets is called as Minority Interest.

CHAPTER-II
ANALYSE OF RESERVES & SURPLUS OF SUBSIDIARY COMPANY
Analysis of profit of subsidiary company as pre-acquisition profit and post
acquisition profit is done on the basis of date of acquisition of shares by the holding company.
Profits earned by the subsidiary company upto date of acquisition of shares by Holding
company are called as pre-acquisition profits or capital profits. The profit earned by the
3

subsidiary company after the acquisition of shares by the holding company is called as Post
acquisition profits or Revenue profits. The loss of the subsidiary company upto the date of
acquisition is treated as a capital loss and subsequent to the acquisition as a Revenue loss.
The reserves to be analysed shall be the reserves as appearing in the Balance
sheet of the subsidiary company as on the date of preparation of consolidated Balance sheet.
Such reserves are subject to adjustments relating to proposed dividends, Bonus / unaccounted
items such as interest payment due to or due from subsidiary company. If the subsidiary has
cumulative preference shares on which dividend has not been provided for or dividend is in
arrears, the same should be provided.
If investments are made during the financial year, the profits should be
apportioned on a reasonable basis i.e. on the basis of time. The assumption being that profits
have accrued evenly during the year.

CAPITAL PROFIT
Return of capital is the distribution of cash that resulted from tax savings on
depreciation, sale of a capital asset or securities, or any other sources unrelated to retained
earnings.
The amount by which an asset's selling price exceeds its initial purchase price.
A realized capital gain is an investment that has been sold at a profit. An unrealized capital gain
4

is an investment that hasn't been sold yet but would result in a profit if sold. Capital gain is
often used to mean realized capital gain. For most investments sold at a profit, including mutual
funds, bonds, options, collectibles, homes, and businesses, the IRS is
owed money called capital gains tax. Opposite of capital loss.

REVENUE PROFIT
In business usage, revenue is income received by an organization in the form
of cash or cash equivalents. Sales revenue or revenues is income received from selling goods or
services over a period of time. Tax revenue is income that a government receives from tax
payers.
Line a double-entry bookkeeping system, revenue accounts are general
edger accounts that are summarized periodically under the heading Revenue or Revenues on an
income statement. Revenue account, revenue or turnover is income that a company receives
from its normal business activities, usually from the sale of services to customers. In many
countries, such as the United Kingdom, revenue is referred to as turnover.

REVALUTION OF ASSETS OF SUBSIDIARY COMPANY

When assets of a subsidiary company are revalued and no adjustment entry is
passed, it has to be done at the time of consolidated of accounts. The value of asset may be
increased or decreased. The assets are to appear in the consolidated balance sheet at revalue
5

figures. If there is an increase in the book value of an asset the same should be treated as preacquisition profit. The total profit will be apportioned and will be used in calculation of
goodwill / capital reserve and minority interest.
If the revaluation results in a loss, the cost of control on value of goodwill or capital reserve
increased.

DEPRECIATION ADJUSTMENT
When any fixed asset of a subsidiary company has been revalue, but no entry
has been passed should be adjusted, but the not only addition or reduction in the consolidated
profit and loss account has to be adjusted.
If the value of asset is written up to a higher figure than that appears in the
books of the subsidiary company, the charge for depreciation to consolidated profit and loss
account should be increased on the increased value of the asset at the appropriate rate. When
the value of asset has been written down, the charge for depreciation should be reduced
proportionately. The amount of extra depreciation is to be written back and considered as a
revenue profit. This should be added to the profit and loss account of the subsidiary company.

CHAPTER-III
INTER COMPANY DIVIDEND
Holding company owns larger portion of the shares of the subsidiary company.
When dividend is paid out of profit of the subsidiary company the holding company is likely to
receive larger portion of it as a shareholder. Such dividend may be paid out of pre-acquisition
profit or post acquisition profit. The accounting treatment depends on such payment.
6

Dividend paid out of pre-acquisition profit by the subsidiary

company
Dividend received from pre-acquisition profit of the subsidiary company, should be treated as
return of capital to the holding company as it transfers to the holding company part of the net
asset in the subsidiary company. In such a situation, the correct effect would be to deduct such
dividend from the cost of investment in the subsidiary company for calculation of Goodwill or
Capital reserve.

Dividend paid out of post acquisition profit by the subsidiary

company
If dividend is received by the holding company from its subsidiary out of post acquisition
profit, it is treated as investment income and credited to profit and loss account of the holding
company.

CHAPTER-IV
COST OF CONTROL
Determine Cost of Control
It is an important aspect of consolidation of accounts to find out either goodwill or capital
reserve at the acquisition of shares in subsidiary company. Following two steps should be taken
to decide cost of control:

A. Determine cost of investment:

Cost of investment is calculated as follows:
Amount invested
(Cost as per Holding Companies balance sheet)
Less: Dividend received from subsidiary out
Of pre-acquisition profit
Cost of preference shares in subsidiary company
Adjusted cost of investment
B. Determine value of investment:
Holding Companys share of capital
Add: Holding Companys share of capital profit
Value of investment

xx
xx
xx
xx
xx
xx
xx

When the value of investment is less than the cost of investment in shares of subsidiary
company, the difference is considered as goodwill. Capital Reserve is the excess of
value of investment over the cost of investment.

CAPITAL RESERVE
Contributions to the capital reserve account can be made from government subsidies, donated
funds, or can be set aside from the firm's or municipality's regular revenue-generating
operations. Once recorded on the reporting entity's balance sheet, these funds are only to be
spent on the capital expenditure projects for which they were initially intended, excluding any
unforeseen circumstances.

GOODWILL
Goodwill is an accounting concept meaning the value of an asset owned that is intangible but
has a quantifiable "prudent value" in a business for example a reputation the firm enjoyed with
its clients. For example, a software company may have net assets (consisting primarily of
miscellaneous equipment, and assuming no debt) valued at $1 million, but the company's
overall value (including brand, customers, intellectual capital) is valued at $10 million.
8

Anybody buying that company would book $10 million in total assets acquired, comprising $1
million physical assets, and $9 million in goodwill. In a private company, goodwill has no
predetermined value prior to the acquisition; its magnitude depends on the two other
variables by definition. A publicly traded company, by contrast, is subject to a constant process
of market valuation, so goodwill will always be apparent.

CHAPTER-V

MINORITY INTEREST
When the Holding Company acquires all the shares of the subsidiary company, the latter
company becomes wholly owned subsidiary company. but when the Holding Company
acquires more than 50% but less than 100%. Shares of the subsidiary company the shareholders
who have a Minority share are called as minority shareholders. The interest of such
shareholders is called as Minority Interest. Minority Interest is the proportion of the subsidiary
companys net asset / shareholders fund, which belongs to the minority shareholders. As per AS
21 minority Interest is that part of the net results of operations and net assets of the subsidiary
attributable to the interest not owned by the parent.
The amount of Minority Interest is shown in the consolidated balance sheet on liability side
separately.
Reserves & surplus of the subsidiary since the date of acquisition of shares upto the date of
preparation of consolidated balance sheet should be identified. It is popularly known as post
acquisition Reserves % surplus.

As per AS 21 minority Interest consists of share in equity on the date of acquisition and share in
movement in equity since the date of acquisition share of minority should be separately
calculated for pre-acquisition and post acquisition period. From holding companys point of
view the above distinction assumes greater significance. Share in equity on the date of
acquisition affects Goodwill/cost of control and share in movement in equity since the date of
acquisition affects consolidated Reserves & surplus.
When minority interest is negative it should be adjusted against majority interest. Negative
Minority Interest should not be shown in the consolidated Balance sheet.

CHAPTER-VI
INTER COMPANY TRANSACTIONS
One important step in consolidated of accounts is elimination of mutual indebtedness. It
includes:
a)
b)
c)
d)
e)

Value of shares held in subsidiary.

Loans to and from subsidiary.
Debentures of one company held by another.
Interest and dividend due.
Inter-company bills of exchange, Sundry Creditors, Sundry Debtors

It should be ensured that the effect of elimination is equal and opposite sides. AS 21 requires
that intra-group balances and intra-group transactions should be eliminated.

UNREALISED INTER COMPANY PROFITS (STOCK

RESERVE)
Sometimes goods sold by one company to another company at a profit have not been resold by
the recipient company at the date of balance sheet but are included in the stock at a price at
10

which they are invoiced by the selling company. The general rule is that the profit on the
transaction must not remain in the Consolidated Balance Sheet. This must be deducted from the
stock and from the consolidated profit in the consolidated accounts.
As per AS 21, full amount of unrealized profit is deducted from stock on asset side and also
from profit & loss A/c on liability side of the consolidated balance sheet.

CHAPTER-VII

BALANCE SHEET
A financial statement that summarizes a company's assets, liabilities and shareholders' equity at
a specific point in time. These three balance sheet segments give investors an idea as to what
the company owns and owes, as well as the amount invested by the shareholders.

LIABILITY
Financial accounting, a liability is defined as an obligation of an entity arising
from past transactions or events, the settlement of which may result in the transfer or use
of assets, provision of services or other yielding of economic benefits in the future. A liability is
defined by the following characteristics:

SHAREHOLDERS
The term has several meanings. In its narrow, classical sense, still commonly used
in accounting, share capital comprises the nominal values of all shares issued (that is, the sum
of their "par values"). In a wider sense, if the shares have no par value or the allocation price of
shares is greater than their par value, the shares are said to be at a premium (called share
premium, additional paid-in capital or paid-in capital in excess of par); in that case, the share

11

capital can be said to be the sum of the aforementioned "nominal" share capital and the
premium. In the modern law of shares, the "par value" concept has diminished in importance,
and share capital can simply be defined as the sum of capital (cash or other assets) the company
has received from investors for its shares.

RESERVES AND SURPLUS

Reserves and surplus at the end of an accounting period the company may decide to transfer
part of the profits to a reserve and retain the balance in the profit and loss account. The reserve
created out of profits transferred from profit and loss account is called general reserve. The
balance in the profit and loss account is called a surplus and will be shown under this head in
the balance sheet.

SECURED LOAN
If a loan is secured, it means it is secured against something you own (an asset) and
failing to repay the loan could result in the lender taking possession of that asset, and selling it
to cover their losses.
The asset in a secured loan will normally be your home, but it can also be your car or another
item of a high value.

UNSECURED LOAN
An unsecured loan does not require you to secure anything against the loan the lender relies
on your contractual obligation to pay it back.

12

Because there is no security and the risk they are taking is therefore greater, the amount you can
borrow tends to be less, and the repayment period is usually shorter.

CURRENT LIABILITIES
A company's debts or obligations that is due within one year. Current liabilities appear on the
company's balance sheet and include short term debt, accounts payable, accrued
Analysts and creditors will often use the current ratio, (which divides current assets by
liabilities), or the quick ratio, (which divides current assets minus inventories by current
liabilities), to determine whether a company has the ability to pay off its current liabilities.

PROVISION
In financial accounting, provision is a word that creates an ambiguous account title. In U.S.
GAAP, provision means an expense, while in IFRS, International Financial Reporting
Standards, it means a liability. So, in the U.S., Provision for Income Taxes means the same
thing as Income Tax Expense, while under IFRS, Provision for Income Taxes means Liability
for Income Taxes Payable. Another examples is provisions for warranty costs [expense in the
US and liability in IFRS]. Sometimes in IFRS, but not in US GAAP, the term reserve is used
instead of term provision; such a use, however, is inconsistent with the terminology suggested
by International Accounting Standards Board.[citation needed] Reserve, which seems to be one of the
most confusing terms in accounting, has the connotation of a debit balance to non-professionals

13

but in accounting always means an account with a credit balance. Reserve for Warranties means
estimated liability for future warranty repairs and replacements, NOT a pool of cash set aside
for the firm to use in making repairs.

CURRENT ASSETS
In financial accounting, assets are economic resources. Anything tangible or intangible that is
capable of being owned or controlled to produce value and that is held to have positive
economic value is considered an asset. Simply stated, assets represent value of ownership that
can be converted into cash (although cash itself is also considered an asset).
Current asset is an asset on the balance sheet which can either be converted to cash or used to
pay current liabilities within 12 months. Typical current assets include cash, cash, short-term
investments, accounts receivable, inventory and the portion of prepaid liabilities which will be
paid within a year.
On a balance sheet, assets will typically be classified into current assets and long-term assets.

FIXED ASSETS
Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is
a term used in accounting for assets and property which cannot easily be converted into cash.
This can be compared with current assets such as cash or bank accounts, which are described
as liquid assets. In most cases, only tangible assets are referred to as fixed.
14

INVESTMENT
Investment has different meanings in finance and economics. Finance investment is putting
money into something with the expectation of gain, that upon thorough analysis, has a high
degree of security for the principal amount, as well as security of return, within an expected
period of time. As such, those shareholders who fail to thoroughly analyze their stock
purchases, such as owners of mutual funds, could well be called gamblers. Indeed, given the
efficient market hypothesis, which implies that a thorough analysis of stock data is irrational,
most rational shareholders are, by definition, not investors, but speculators.
Investment is related to saving or deferring consumption. Investment is involved in many areas
of the economy, such as business management and finance whether for Households, Firms, or
Governments.

LOANS AND ADVANCES

Loans and advances for financing of current assets is a short-term loan for companies needing a
short-term increase in current assets in case of seasonal necessity (Christmas, winter or summer
goods, etc.) or for a separate project requiring the finances for purchasing of stock.
A loan for financing of current assets can also be used for implementation of new projects, e.g.,
launch of a new line of goods where it is necessary to ensure a full spectrum of goods, while
suppliers do not offer deferred payment terms yet. The loan repayment takes place gradually
each month from the positive cash flow generated from the project.

15

CHAPTER-VIII
PROBLEMS

WITH

SOLUTION

Q.1 The following are the balance sheet of Yukti Ltd. and Shakti Ltd. As on 31st March
2010:
LAIBILI

Yukti
Ltd. Rs

Shakti
Ltd. Rs

ASS Yukti
Ltd. Rs

TIES

ETS

Share Capital
Equity shares of
Rs.10/- 12,00,000 6,00,000

Fixed Assets:
Building
Machinery
Furniture
Investment
Current Assets
Stock
Debtors
Bills

each
Reserves/Surplus
General Reserve
Profit/Loss A/C
Current Liab.
Creditors
Bills Payable
Outstanding Exp.
Total

4,50,000 1,00,000
1,70,000 2,40,000
1,50,000
1,65,000
50,000

Shakti
Ltd. Rs

6,50,000
3,90,000
60,000
5,00,000

4,40,000
1,40,000
35,000

1,20,000
3,80,000

1,90,000
2,60,000

70,000
15,000

40,000
10,000

21,85,000

11,15,000

75,000
30,000

21,85,000 11,15,000

Receivable
Bank Balance
Total

The following further information is available1) Yukti Ltd. Acquired 45,000 shares of Shakti Ltd. As on 31st March ,2009
2) Sundry debtors of Yukti Ltd. include Rs.25000 due for Shakti Ltd.
3) Bills receivable of Shakti Ltd. Include Rs 15000 due from Yukti Ltd.
16

4) The Stock of Shakti Ltd. Includes good purchased from Yukti Ltd. Of Rs.
20000 which includes profit charged by Yukti Ltd @ 25% on cost.
5) The position of reserves and surplus of Shakti Ltd. As on 31 stMarch,2009 was as
follows:
General Reserve
Rs. 75000
Profit and Loss Account
Rs. 150000
You are the required to prepare a Consolidated Balance Sheet of Yukti Ltd. and Shakti Ltd. as
on 31st March 2010 along with necessary working for Minority Interest etc.

SOLUTION:
Proportion of Holding Shares
Yuktis shares in Shakti ltd.

= 4500060000*100 = 75%

Shakti ltd.

= 1500060000 *100 = 25%

ANALYSIS OF RESERVE & SURPLUS OF SUBSIDIAREY

Rs.

Rs.
(1-4-2009 to 31-

PARTICULARS

General Reserve
Add: P & L A/c
Holding Share (75%)
Minority Interest (25%)

CAPITAL

3-2010)
REVENUE

PROFIT
75000
150000

PROFIT
25000
90000

225000

115000

168750
56250

86250
28750
17

COST OF CONTROL
Cost of Investment
Less: Share capital (600000*75%)
Less: Capital Profit
CAPITAL RESERVE

500000
450000
168750
118750

MINORITY INTEREST
Share capital (600000*25%)
Add: Capital Profit
Add: Revenue Profit
TOTAL

150000
56250
28750
235000

PROFIT & LOSS A/C

P & L A/c
Add: Revenue Profit
Less: Stock Reserve (20000*20%)
P & L A/c

170000
86250
4000
252250

CONSOLIDATED BALANCE SHEET as on 31-3-2010

LIABILITIES

Rs.

ASSETS

Rs.

18

SHARE CAPITAL
120000 Eq. Shares of Rs. 10 each
RESERVE & SURPLUS
Capital Reserve
General Reserve
P & L A/c
Minority Interest
SECURED LOANS

FIXED ASSETS
1200000 Building
1090000
Machinery
530000
Furniture
95000
118750 INVESTMENTS
450000 CURRENT ASSETS, LOANS
252250
235000 & ADVANCE
Stock
310000
306000
Less: Stock reserve
4000
Debtors
640000 615000

UNSECURED LOANS
CURRENT

LIABILITIES

PROVISIONS
Creditors
Less: Set off
Bills Payable
Less: set off
Outstanding Expenses

Total

&

225000
25000
235000
15000

Less: Set off

Bills Receivable:
Less: Set off
Bank
200000 MISCELLANEOUS

25000
110000
15000

95000
25000

220000 EXPENDITUES
80000 (to the extent not written off)

2756000 Total

2756000

Q) 2. The balance sheet of Albert Limited and Ballavi Limited as on 31 st March, 2010
Were as follows:

19

Liabilities

Albert
Ltd.Rs

Ballavi
Ltd.Rs

Share capital (Equity Share of Rs. 10/-each)

General Reserve on1-4-2009
Sundry creditors
Bills payable
Profit and Loss Account on 1-4-2009
Profit for the year ended 31-3-2010

1000000
200000
200000
50000
60000
150000

250000
80000
100000
30000
60000
50000

Total

1600000

570000

Assets
Goodwill
Buildings
Machinery
Stock
Sundry Debtors
Investment
Bills receivable
Cash and Bank Balance
Total

Albert
Ballavi
Ltd. Rs
Ltd. Rs
100000
50000
200000 100000
200000
500000
100000
200000
70000
340000
240000
30000
30000
20000
50000
1660000
570000

The following information is given:

1) Albert Ltd. Acquired 15,000 Equity Shares of Ballavi Ltd. For Rs.190000 on 1-42009.
2) Sundry Debtors of Albert Ltd. Include Rs. 30000 due from Ballavi Ltd.
3) Bills Receivable of Ballavi Ltd. Include Rs.10000 due from Albert Ltd.
4) The stock of Ballavi Ltd. Include Goods purchased from Albert Ltd. at Rs 10,000
which include profit charged by Albert ltd. @ 25%on cost.
5) Albert Ltd. AND Ballavi Ltd. Have proposed 10%Divident for 2009-2010 but effect
has not been in account.
20

Prepare consolidated balance sheet of albert ltd. and ballavi ltd. as at 31 march2010
with working of minority interest and cost of control.

SOLUTION:
Proportion of Holding Shares
Alberts shares in Ballavi

= 1500025000 *100 = 60%

Ballavi

= 1000025000 *100 = 40%

ANALYSIS OF RESERVE & SURPLUS OF SUBSIDIAREY

Rs.

Rs.
(1-4-2009

to

PARTICULARS

General Reserve
Add: P & L A/c
Ass: Profit for the yr.
Less: Proposed Dividend (10%)

CAPITAL

31-3-2010)
REVENUE

PROFIT
80000
60000
140000

PROFIT
50000
25000
25000

84000
56000

15000
10000

Holding Share (60%)

Minority Interest (40%)

COST OF CONTROL
Cost of Investment
Less: Share capital (250000*60%)
Less: Capital Profit
CAPITAL RESERVE

190000
150000
84000
44000

MINORITY INTEREST
Share capital (250000*40%)
Add: Capital Profit
Add: Revenue Profit
Add: Proposed Dividend (25000*40%)
TOTAL

100000
56000
10000
10000
176000

PROFIT & LOSS A/C

Opening P & L A/c

60000
21

Add: P & L A/c

Add: Revenue Profit
Add: Proposed dividend (25000*60%)
Less: proposed dividend (1000000*10%)
Less: Stock Reserve (10000*20%)
P & L A/c

150000
15000
15000
100000
2000
138000

CONSOLIDATED BALANCE SHEET as on 31-3-2010

LIABILITIES

Rs.

ASSETS

Rs.

SHARE CAPITAL
100000 Eq. Shares of Rs. 10 each
RESERVE & SURPLUS
Capital Reserve
General Reserve
P & L A/c
Minority Interest
SECURED LOANS
UNSECURED LOANS
CURRENT

LIABILITIES

PROVISIONS
Creditors
Less: Set off
Bills Payable
Less: set off
Proposed Dividend

FIXED ASSETS
1000000 Goodwill
Building
Machinery
44000
200000 INVESTMENTS
138000
176000 CURRENT ASSETS, LOANS &
ADVANCE
Stock
300000
Less: Stock reserve
2000
Debtors
410000
Less: set off
30000
&
Bills Receivable
60000
Less:
Set-off

300000
30000
80000
10000

150000
300000
700000
50000

298000
380000
50000
70000

270000 10000
Bank
70000
100000 MISCELLANEOUS
EXPENDITUES

Total

1998000 Total

1998000

Q) 3) Balance Sheet of A Ltd and B Ltd as on 31 3 2012 as followed

Liabilities

A Ltd

B Ltd

Assets

A Ltd

B Ltd

22

Share Capital
( Rs 100 )

Fixed Assets
2500000

2000000

General
Reserve

500000

600000

P & L A/C

300000

360000

Bank Loan

200000

240000

400000
3900000

400000
3600000

1860000

1500000

540000

300000

Current Assets

1500000

1800000

Total

3900000

3600000

Investment

Current
Liabilities
Total

Additional Information:
On 1-7-2011 A LTD Purchases 14000 share of B LTD at the rate of RS 14 per share.
1. On 1-4-2011 B LTD at a Balance of Reserve of RS 400000 & P & L A/C 200000 .
2. Current Assets of A LTD included RS 60,000 Receivable from B LTD.
3. Prepaid the Consolidated Balance Sheet

SOLUTION:
Proportion of Holding Shares

A share in B ltd.

= 1400020000 *100 = 70%

B ltd.

= 600020000 *100 = 30%

ANALYSIS OF RESERVE & SURPLUS OF SUBSIDIAREY

23

Rs.
PARTICULARS

Rs.
(1-7-20011
31-3-2012)

CAPITAL

REVENUE

PROFIT

PROFIT

General Reserve
Add: P & L A/c

Holding Share (60%)

Minority Interest (40%)

400000
50000
200000
40000
690000

150000
120000
270000

483000
207000

189000
81000

COST OF CONTROL
Cost of Investment (14000 shares*14)
Less: Share capital (14000*100)
Less: Capital Profit
CAPITAL RESERVE

196000
1400000
483000
1687000

MINORITY INTEREST
Share capital (2000000-1400000)
Add: Capital Profit
Add: Revenue Profit
TOTAL

600000
207000
81000
888000

PROFIT & LOSS A/C

Opening P & L A/c
Add: P & L A/c
P & L A/c

300000
189000
489000

24

CONSOLIDATED BALANCE SHEET OF A LTD & B LTD

Liabilities
Share Capital

Amount
25,00,000

Assets
Fixed Assets

Amount
33,60,000

General Reserve

5,00,000

Investment

P & L A/C

4,89,000

Current Assets

32,40,000

Capital Reserve

16,87,000

Bank Loan

4,40,000

Current Liabilities

7,40,000

Minority Interest

8,88,000

Total

72,44,000

Total

72,44,000

6,44,000

25

CHAPTER-IX
SUMMARY
1.
2.

Consolidation of accounts is governed by AS 21

The date of purchase of shares is the date of acquisition of shares which is very important

3.
4.
5.

in consolidation.
Profit upto the date of acquisition is the capital profit
Profit from the date of acquisition is the revenue profit
Pre-acquisition profits and reserves are taken into account for calculation of cost of

6.
7.
8.

control.
Post acquisition profits are not considered in determination of cost of control.
Inter-company transactions are eliminated from the consolidated balance sheet.
Share capital of subsidiary company and investment in share if subsidiary of company

should be eliminated.
9. Minority interest is shows in consolidated balance sheet on liability side.
10. Cash in transit is shown in consolidated balance sheet on assets side.
11. In the case of revaluation of any asset the change in the value is adjusted to capital profit.
12. Any unrealized profit include in the stock is deducted from stock and P & L a/c in
consolidated balance sheet.
13. Issue of bonus shares by the subsidiary company should be added to the shares held by
holding Company in subsidiary Company Minority interest is also increased by the bonus
shares Issued to them and the capital profit or revenue profit from which bonus issue is
made is reduced.

CHAPTER-X

BIBLIOGRAPHY
BOOK:

26

1.
2.

Advanced Financial Accounting By L.N Chopde & D.H Choudhari

Advanced Financial Accounting By Dr. Varsha M. Ainapure

WEBSIDE:
1. www.investopedia.com/terms/c/consolidatedfinancialstatement.asp#a
xzz257Aqfjdq
2. www.mca.gov.in/ministry/notificatirs/pdf/AS-21.pdf

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