A PROJECT REPORT ON

CONSOLIDATION OF FINANCIAL STATEMENTS

SUBMITTED IN PARTIAL FULFILMENT OF THE
REQUIREMENT FOR
MASTER OF COMMERCE (M. COM)
ACCOUNTANCY GROUP
SEMESTER- I
IN THE SUBJECT
ADVANCED FINANCE ACCOUNTING
TO
UNIVERSITY OF MUMBAI
BY
VIVEK DHANJI CHAUHAN
ROLL NO. 11
2014-2015
UNDER THE GUIDANCE OF
PROF. PARAS JAIN
SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS
B- ROAD, CHURCHGATE (E) Mumbai 400 020

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DECLARATION

I, VIVEK DHANJI CHAUHAN, student of Master of Commerce (M. Com.) Accountancy Group
Semester- I, Roll No. 11 of SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS BROAD CHURCHGATE (E) Mumbai 400 020, hereby declare that I have completed the project
on Consolidation Financial Statements in the subject Advanced Finance Accounting for the
Academic Year 2013-14.

______________
VIVEK DHANJI CHAUHAN
Date:

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CERTIFICATE

I, PARAS JAIN hereby certify that VIVEK DHANJI CHAUHAN, Roll No 11 of M. Com.
Semester I of SYDENHAM COLLEGE OF COMMERCE AND ECONOMICS , has successfully
completed project on Consolidation Financial Statements in the subject Advanced Finance
Accounting for the Academic Year 2013-14.

________________

_________________

Internal Guide

External Guide

________________

__________________

Coordinator

Principal

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ACKNOWLEDGEMENT

At this juncture, I would like to express my sincere gratitude to those who have helped me
directly or indirectly during this project.
My sincere thanks to PARAS JAIN for his whole hearted support, constructive advice and
practical guidance. I would also like to thank the college library for the reference material and
information used.

_________________________
(VIVEK DHANJI CHAUHAN)

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EXECUTIVE SUMMERY
Todays corporations continue to face a vast range of complex financial reporting requirements, and
ever-increasing scrutiny by auditors and stakeholders. While transaction systems such as enterprise
resource planning (ERP) systems typically have general ledger modules that summarize results at
period-end, ERPs on their own are not adequate to support the extended financial close process.
Financial consolidation and reporting applications add significant value by enabling flexible, accurate
and rapid reporting, and integrate easily with any ERP system. Financial consolidation and reporting
applications are a key component of the extended financial close enabling an integrated and
streamlined process - all the way from the recording of transactions through periodic regulatory filing.
Financial consolidation and reporting applications automate the extended financial close across
multiple hierarchies and include support for all of the special calculations required by US-GAAP, IFRS
and other regulatory reporting standards.

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INDEX
CHAP
TER.
No.

PARTICULARS

PAGE
NO.

Introduction

7-12

II

Applicability

13-13

III

Advantages

14-14

IV

Scope

15-16
17-17

Presentation of consolidated Financial Statement

VI

Consolidation Procedure

18-25

VII

Balance Sheet

26-28

VIII

Statement of Profit & Loss

29-33

Bibliography

34-34

IX

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CHAPTER- I

INTRODUCTION
The objective of this Standard is to lay down principles and procedures for preparation and presentation
of consolidated financial statements. Consolidated financial statements are presented by a parent (also
known as holding enterprise) to provide financial information about the economic activities of its
group. These statements are intended to present financialinformation about a parent and its subsidiary
(is) as a single economic entity to show the economic resources controlled by the group, the obligations
of the group and results the group achieves with its resources.
He Council of the Institute of Chartered Accountants of India has issued Accounting Standard (AS) 21
'Consolidated Financial Statements' which lays down principles and procedures for preparation and
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presentation of consolidated financial statements. Consolidated financial statements are presented for a
group of entities under the control of a parent. A 'parent' is an entity that has one or more subsidiaries. A
group comprises a parent and its subsidiaries. Thus, consolidated financial statements are the financial
statements of a group presented as those of a single entity. AS 21 is applicable to a parent that presents
consolidated financial statements. In other words, whenever a parent decides to prepare and present
consolidated financial statements, it should do so in accordance with the requirements of Accounting
Standard

(AS)

21,

Consolidated

Financial

Statements.

Consolidated financial statements normally include consolidated balance sheet, consolidated statement
of profit and loss, and notes, explanatory material that form an integral part thereof, and also
consolidated cash flow statement (in case a parent presents its own cash flow statement). Consolidated
financial statements are presented, to the extent possible, in the same format as adopted by the parent
for

its

separate

financial

statements.

An entity which prepares the consolidated financial statements, either under any law or regulation governing the entity or suomotu, might be required to or otherwise engage a member for conducting the
audit of consolidated financial statements. The auditor of the consolidated financial statements may not
necessarily be the auditor of the separate financial statements of the parent or one or more of the
components included in the consolidated financial statements. However, a law or regulation governing
the entity may require the consolidated financial statements to be audited by the statutory auditor of the
entity. This Guidance Note provides guidance on the specific issues and audit procedures to be applied
in an audit of consolidated financial statements.
1. This Standard should be applied in the preparation and presentation of consolidated financial
statements for a group of enterprises under the control of a parent.

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2. This Standard should also be applied in accounting for investments in subsidiaries in the separate
financial statements of a parent.
3. In the preparation of consolidated financial statements, other Accounting Standards also apply in
the same manner as they apply to the separate financial statements
4. This Standard does not deal with:
(a) methods of accounting for amalgamations and their effects on consolidation, including goodwill
arising on amalgamation (see AS 14, Accounting for Amalgamations);
(b) accounting for investments in associates (at present governed by AS 13, Accounting for
Investments)
(c) accounting for investments in joint ventures (at present governed by AS 13, Accounting for
Investments)
5. For the purpose of this Standard, the following terms are used with the meanings specified:
5.1 Control:
(a) the ownership, directly or indirectly through subsidiary(ies), of more than one-half of the voting
power of an enterprise;
(b)

control of the composition of the board of directors in the case of a company or of the

composition of the corresponding governing body in case of any other enterprise so as to obtain
economic benefits from its activities.
5.2 A subsidiary is an enterprise that is controlled by another enterprise
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(known as the parent).

5.3 A parent is an enterprise that has one or more subsidiaries.
5.4 A group is a parent and all its subsidiaries.
5.5 Consolidated financial statements are the financial statements of a group presented as those of a
single enterprise
5.6 Equity is the residual interest in the assets of an enterprise after deducting all its liabilities.
5.7 Minority interest is that part of the net results of operations and of the net assets of a subsidiary
attributable to interests which are not owned, directly or indirectly through subsidiary(ies), by the
parent.

6. Consolidated

financial statements normally include consolidated balance sheet, consolidated

statement of profit and loss, and notes, other statements and explanatory material that form an
integral part thereof. Consolidated cash flow statement is presented in case a parent presents its own
cash flow statement. The consolidated financial statements are presented, to the extent possible, in
the same format as that adopted by the parent for its separate financial statements.

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ACCOUNTING STANDARD 21: CONSOLIDATED FINANCIAL STATEMENTS

To be applied in the preparation and presentation of consolidated financial statements(CFS) for a
group of enterprises under the control of a parent. Consolidated Financial Statements is
recommendatory. However, if consolidated financial statements are presented, these should be prepared
in accordance with the standard. For listed companies mandatory as per listing agreement.

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 Control means the ownership directly or indirectly through subsidiaries, of more than one-half of the
voting

power

of

an

enterprise

or

control

of

the

composition

of

the

board

of directors or such other governing body, to obtain economic benefit. Subsidiary is anenterprise that is
controlled by parent.
Control of composition implies power to appoint or remove all or a majority of directors.
When an enterprise is controlled by two enterprises definitions of control, both theenterprises are
required to consolidate the financial statements of the first mentionedenterprise (ASI-24).
Consolidated financial statements to be presented in addition to separate financialstatements.

All subsidiaries, domestic and foreign to be consolidated except where control is

intendedto be temporary; i.e., intention at the time of investing is to dispose the relevantinvestment in t
he near future or the subsidiary operates under severe longterm restrictions impairing transfer of
funds to the parent. Near future generally means notmore than twelve months from the date of
acquisition of relevant investments (ASI-8).Control is to be regarded as temporary when an enterprise
holds shares as stock-intrade and has acquired and held with an intention to dispose them in the near
future(ASI-25).

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 CFS normally includes consolidated balance sheet, consolidated P & L, notes and otherstatements
necessary for preparing a true and fair view. Cash flow only in case parentpresents cash flow statement.

CHAPTER II

APPLICABILITY
Effective in respect of accounting periods commencing on or after April 01, 2001
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Applicable to enterprises that present consolidated financial statements

Mandatory for listed entities
Optional for other entities
Accounting Standard (AS) 21 (issued 2001),Consolidated Financial Statements and Accounting for
Investments in Subsidiaries in Separate Financial Statements, issued by the Council of the Institute of
Chartered Accountants of India, comes came into effect in respectof accounting periods commencing
on or after 1-4-2001. This limited revision to the Standard comes into effect in respect of accounting
periods commencing on or after the date on which Accounting Standard (AS) 30, Financial
Instruments: Recognition and Measurement, comes into effect. In respect of separate financial
statements of an enterprise, this limited revision comes into effect from the same date. In respect of
consolidated financial statements, this Accounting Standard is mandatory where the enterprise prepares
and presents consolidated financial statements. In other words, the accounting standard does not
mandate an enterprise to present consolidated financial statements but, if the enterprise presents
consolidated financial statements, for a period commencing on or after the date on which this Standard
first came into effect, i.e., 1-4-2001, for complying with the requirements of any statute or otherwise, it
should prepare and present consolidated financial statements in accordance with this Standard,.

CHAPTER - III
ADVANTAGE
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Consolidated financial statements are presented primarily for the benefit of the shareholders, creditors,
and other resource providers of the parent.
Significantly, consolidated financial statements often represent the only means of obtaining a clear
picture of the total resources of the combined entity that are under the control of the parent company.
Advantage of holding company as under:
a. Subsidiary company maintain their separate identities and as such they maintain their group.
b. Public at large is ignorant about such holding, hence monopoly or near monopoly can be
established.
c. Holding company device is a low cost device to exercise control over other companies.
d. Losses of subsidiary company are allowed to be carried forward by subsidiary company for tax
purpose.
e. Each subsidiary has to maintain its accounts, therefore financial position of each subsidiary
company is known.
f. Individual assessment of a unit as such is possible incase of subsidiary company.
g. It is very easy to disinvest the funds invested in subsidiary company.
h. Expenses and overheads may be reduced as a result of combination
CHAPTER- IV

SCOPE
This Standard shall be applied in the preparation and presentation of consolidated financial statements
for a group of entities under the control of a parent.
This Standard does not deal with methods of accounting for business combinations and their effects on
consolidation, including goodwill arising on a business combination

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This Standard shall also be applied in accounting for investments in subsidiaries, jointly controlled
entities and associates when an entity elects, or is required by law, to present separate financial
statements.
This Exposure Draft is issued pursuant to the decision to converge with IFRSs in respect ofaccounting
periods commencing on or after April 1, 2011. All existing Accounting Standards and new Accounting
Standards which are referred to in this Draft are also being revised or formulated, as the case may be, to
converge with IFRSs from the aforesaid date. References to the other standards may be viewed
accordingly.
Attention is specifically drawn to paragraph 4.3 of the Preface, according to which
accountingstandards are intended to apply only to items which are material.
The following terms are used in this Standard with the meanings specified: Consolidated financial
statements are the financial statements of a group presented as those of a single economic entity.
Control is the power to govern the financial and operating policies of an entity so as to obtain benefits
from its activities.
A group is a parent and all its subsidiaries.
Non-controlling interest is the equity in a subsidiary not attributable, directly or indirectly, to a parent.
A parent is an entity that has one or more subsidiaries.
Separate financial statements are those presented by a parent, an investor in an

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associate or a venture in a jointly controlled entity, in which the investments are accounted for on the
basis of the direct equity interest rather than on the basis of the reported results and net assets of the
investees.
A subsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by
another entity (known as the parent).
A parent or its subsidiary may be an investor in an associate or a venture in a jointly
controlled entity. In such cases, consolidated financial statements prepared and presented in accordance
with this Standard are also prepared so as to comply with AS 23 (Revised 20XX) Investments in
Associates and AS 27 (Revised 20XX) Interests in Joint Ventures.
For an entity described in paragraph 5, separate financial statements are those prepared and presented
in addition to the financial statements referred to in paragraph
Separate financial statements need not be appended to, or accompany, those statements, unless
required by law.
The financial statements of an entity that does not have a subsidiary, associate or venturers interest in
a jointly controlled entity are not separate financial statements.
A parent that is exempted in accordance with paragraph 10 from presenting consolidated financial
statements may present separate financial statements as its only financial statements.
CHAPTER- V

PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS

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A parent, other than a parent described in paragraph 10, shall present consolidated financial statements
in which it consolidates its investments in subsidiaries in accordance with this Standard.
A parent need not present consolidated financial statements if and only if:
(a) the parent is itself a wholly-owned subsidiary, or is a partially owned subsidiary of another entity
and its other owners, including those not otherwise entitled to vote, have been informed about, and do
not object to, the parent not presenting consolidated financial statements;
(b) the parents debt or equity instruments are not traded in a public market (a domestic or foreign stock
exchange or an over-the counter market, including local and regional markets);
(c) the parent did not file, nor is it in the process of filing, its financial statements with a Securities
Regulator or other regulatory organization for the purpose of issuing any class of instruments in a
public market; and
(d) the ultimate or any intermediate parent of the parent produces consolidated financial statements
available for public use that comply with Accounting Standards.

CHAPTERVI
CONSOLIDATION PROCEDURE
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In preparing consolidated financial statements, the financial statements of the parent and its
subsidiaries should be combined on a line by line basis by adding together like items of assets,
liabilities, incomeand expenses. In order that the consolidated financial statements present financial
information about the group as that of a single enterprise, the following steps should be taken:
(a) The cost to the parent of its investment in each subsidiary and the parents portion of equity of each
subsidiary, at the date on which investment in each subsidiary is made, should be eliminated;
(b) Any excess of the cost to the parent of its investment in a subsidiary over the parents
portion of equity of the subsidiary, at the date on which investment in the subsidiary is made, should be
described as goodwill to be recognized as an asset in the consolidated financial statements;
(c) When the cost to the parent of its investment in a subsidiary is less than the parents portion of
equity of the subsidiary, at the date on which investment in the subsidiary is made, the difference
should be treated as a capital reserve in the consolidated financial statements;
(d) Minority interests in the net income of consolidated subsidiaries for the reporting period should
be identified and adjusted against the income of the group in order to arrive at the netincome
attributable to the owners of the parent; and
(e) Minority interests in the net assets of consolidated subsidiaries should be identified and presented in
the consolidated balance sheet separately from liabilities and the equity of the parents shareholders.
Minority interests in the net assets consist of:
(i) The amount of equity attributable to minorities at the date on which investment in a subsidiary is
made; and

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(ii)

The minorities share of movements in equity since the date the parent-subsidiary relationship

came in existence.
Where the carrying amount of the investment in the subsidiary isdifferent from its cost, the carrying
amount is considered for thepurpose of above computations.

EXPLANATION

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(a) The tax expense (comprising current tax and deferred tax) to be shown in the consolidated financial
statements should be the aggregate of the amounts of tax expense appearing in the separate
financial statements of the parent and its subsidiaries.
(b)

The parents share in the post-acquisition reserves of a subsidiary, forming part of the

corresponding reserves in the consolidated balance sheet, is not required to be disclosed separately in
the consolidated balance sheet keeping in view the objective of consolidated financial statements to
present financial information of the group as a whole. In view of this, the consolidated reserves
disclosed in the consolidated balance sheet are inclusive of the parents share in the post-acquisition
reserves of a subsidiary.
The parents portion of equity in a subsidiary, at the date on which investment is made, is determined
on the basis of information contained in the financial statements of the subsidiary as on the date
of investment. However, if the financial statements of a subsidiary, as on the date of
investment, are not available and if it is impracticable to draw the financial statements of the
subsidiary as on that date, financial statements of the subsidiary for the immediately preceding
period are used as a basis for consolidation. Adjustments are made to these financial statements for
the effects of significant transactions or other events that occur between Consolidated Financial
Statement the date of such financial statements and the date of investment in the subsidiary.
If an enterprise makes two or more investments in another enterprise at different dates and eventually
obtains control of the other enterprise, the consolidated financial statements are presented only from the
date on which holding-subsidiary relationship comes in existence. If two or more investments are
made over a period of time, the equity of the subsidiary at the date of investment, for the purposes of
paragraph 13 above, is generally determined on a step-by-step basis; however, if small investments are
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made over a period of time and then an investment is made that results in control, the date of the latest
investment, as a practicable measure, may be considered as the date of investment.
Intra group balances and intra group transactions and resulting unrealized profits should be eliminated
in full. Unrealized losses resulting from intra group transactions should also be eliminated unlesscost
cannot be recovered.
Intra- group balances and intra group transactions, including sales, expenses and dividends, are
eliminated in full. Unrealized profits resulting from intragroup transactions that are included in the
carrying amount of assets, such as inventory and fixed assets, are eliminated in full.
Unrealized losses resulting from intragroup transactions that are deducted in arriving at the carrying
amount of assets are also eliminated unless cost cannot beThe financial statements used in the
consolidation should be drawn up to the same reporting date. If it is not practicable to draw up
the financial statements of one or more subsidiaries to such date and, accordingly, those financial
statements are drawn up to different reporting dates, adjustments should be made for the effects of
significant transactionsor other events that occur between those dates and the date of the parents
financial statements. In any case, the difference between reporting dates should not be more than six
months.

The financial statements of the parent and its subsidiaries used in the preparation of the consolidated
financial statements are usually drawn up to the same date. When the reporting dates are different, the
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subsidiary of ten prepares, for consolidation purposes, statements as at the same date as that of the
parent. When it is impracticable to do this, financial statements drawn up to different reporting dates
may be used provided the difference in reporting dates is not more than six months. The
consistency principle requires that the length of the reporting periods and any difference in the
reporting dates should be the same from period to period.
Consolidated financial statements should be prepared using uniform accounting policies for like
transactions and other events in similar circumstances. If it is not practicable to use uniform
accounting policies in preparing the consolidated financial statements, that fact should be disclosed
together with the proportions of the items in the consolidated financial statements to which the different
accounting policies have been applied.
If a member of the group uses accounting policies other than those adopted in the consolidated
financial statements for like transactions and events in similar circumstances, appropriate adjustments
are made to its financial statements when they are used in preparing the consolidated financial
statements.
The results of operations of a subsidiary are included in the consolidated financial statements as from
the date on which parent-subsidiary relationship came in existence.

The results of operations of a

subsidiary with which parent-subsidiary relationship ceases to exist are included in the
consolidatedstatement of profit and loss until the date of cessation of the relationship.

The difference between the proceeds from the disposal of investment in a subsidiary and the carrying
amount of its assets less liabilities as of the date of disposal is recognized in the consolidated statement
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of profit and loss as the profit or loss on the disposal of the investment in the subsidiary. In orderto
ensure the comparability of the financial statements from one accounting period to the next,
supplementary information is often provided about the effect of the acquisition and disposal of
subsidiaries on the financial position at the reporting date and the results for the reporting period
and on theAn investment in an enterprise should be accounted for in accordance with Accounting
Standard (AS) 13, Accounting for Investments, from thedate that the enterprise ceases to be a
subsidiary and does not become anassociate
The carrying amount of the investment at the date that it ceases to be a subsidiary is regarded as cost
thereafter.
Minority interests should be presented in the consolidated balancesheet separately from liabilities and
the equity of the parents shareholders.
Minority interests in the income of the group should also be separately presented.
The losses applicable to the minority in a consolidated subsidiary may exceed the minority interest in
the equity of the subsidiary. The excess, and any further losses applicable to the minority, are adjusted
against the majority interest except to the extent that the minority has a binding obligation to, an disable
to, make good the losses. If the subsidiary subsequently reports profits, all such profits are allocated to
the majority interest until the minoritysshare of losses previously absorbed by the majority has been
recovered.
If a subsidiary has outstanding cumulative preference shares which areheld outside the group, the
parent computes its share of profits or lossesafter

adjusting

dividends, whether or not dividends have been declared..

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for

the

subsidiarys preference

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PROCEDURE TO MAKE CONSOLIDATED BALANCE SHEET

Consolidation should be done by line by line aggregating the assets and liabilities.
LIABILITIES
1. Share Capital :
2.

Only holding company share capital of subsidiary company should

be ignored.

Reserves and Surplus: Reserves as per Holding Company

Balance Sheet
Less: Dividend Received from
Subsidiary out Of pre-acquisition profit
Add: Holding company Share of Revenue
Reserve and Revenue profit of subsidiary Company
Less: Stock Reserve created
Add: Capital reserve

3.Miniroty Interest: It should be shown separately below Reserve and surplus.

4..Other Liabilities: Total of both the company liabilities
Less: Inter Company owing

ASSETS
1. Fixed Assets: Total of the both companies adjusted for revaluation.
2. Investments : Total of out side Investments of holding company and subsidiary
Company.
3. Current Assets, Loanand Advances:
Total of both the companies balances adjusted for inter
Company owing and stock Reserve.
4. Miscellaneous Expenditure : Only holding company balance should be shown.

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CHAPTER - VII

CONSOLIDATED BALANCE SHEET

A ltd. Acquired 2000 Equity Share of Rs.100 each in B ltd. On 31.3.2012. The summarizedbalance
sheet of the two companies as on 31.3.2013. were as follows :
Liabilities

A ltd.

B ltd.

Assets

A ltd.

B ltd

Equity Share

800000

250000

Fixed Assets

700000

250000

each
Reserves

300000

50000

Current Assets

400000

200000

Profits & Loss A/c

100000

100000

2000 Shares in

300000

Creditors

200000

50000

1400000

450000

1400000

450000

capital:
Share of Rs.100

B ltd., at cost

B ltd. Had a credit balance of Rs. 50000 in the Reserves and Rs. 20000 in the Profit and Loss Account
when A ltd. Acquired share in B ltd. B ltd issued bones shares in the ratio of one for every five shares
held out of the profits earned during 2012-13. This us not shown in the above Balance Sheet of B ltd.
Prepare a consolidated Balance Sheet of A ltd. And its subsidiary, as on 31.3.2013, giving all necessary
workings.

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Balance Sheet of A ltd. And its subsidiary B Ltd.

As at 31.3.2013
Rupees in 000
Particulars

I.

Note

Figures as at the end of

No.

current reporting period

EQUITY AND LIABILITY

1.Shareholders Fund
a. Share Capital
b. Reserves and Surplus

800

424

2. Minority Interest

1224
80

3. Non- Current Liabilities

Nil

4. Current Liabilities
a. Trade Payables
Total
II.

250
1554

ASSETS

1.Non- current Assets

a. Fixed Assets
i. Tangible Assets
ii. Intangible Assets
2. Current Assets
a. Inventories

950

6
Total

954
600
1554

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Notes to Balance Sheet

Rs 000
1. Share Capital
Issued & Subscribed
80000 Equity Shares of Rs. 100 each.
800
2. Reserves & Surplus
Reserves
Profit & Loss A/C
3. Trade Payables
Creditors
4. Tangible Assets
Other Fixed Assets
5. Intangible Assets

300
124
250
950

Goodwill

6. Inventories

600

CHAPTER- VIII

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PROCEDURE TO MAKE CONSOLIDATED STATEMENT OF

PROFIT & LOSS
In like manner consolidated profit and loss account need to be prepared. The steps required in
preparing Consolidation Profit and Loss account are as follows :
I.

Steps :
Ascertain the items of income /expenses between Holding and Subsidiary companies.
a. Purchase and Sale of goods between companies.
b. Rendering of services between companies.
c. Interest on Inter company loan.
d. Interest on Inter company holding of debenture s.
e. Dividend paid or declared by subsidiary company held by holding company.
f. Share of common expenses between the companies,(i.e paid by one company and

II.

recovered form other company.

As per pre-acquisition period and post acquisition period and share of holding company and

III.

minority interest therein, as explained in preceding paragraph.

Ascertain unrealised profit on unsold stock as explained earlier.

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

On 1.7.2012 A Ltd. Purchase 270000 Equity shares and 9000 Preference Shares in B Ltd. Both the
companies make up their accounts on 30th June each year. The following are extracted from the
companies records for the year ended on 30.6.2013.
Particulars
Sales
Purchases
Selling Expenses
Overhead Expenses

A Ltd.
16200000
8963820
810000
2070000
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30

B Ltd.
15300000
8686440
1215000
945000

Interim dividend paid on 1.1.2012

On Equity Shares

1350000

On Preference Shares

Stock on 30.6.2011
Issued and paid-up shares Capital

893700

Equity Shares of Rs. 10 each

5400000

9% Preference share of Rs. 100 each

Profit and loss Account

Balance on 30.6.2011
The following additional information is relevant:

481500

720000
81000
1805040
3600000
1800000
576000

1. Profits of B Ltd. Accrued evenly throughout the year.

2. Stock on hand as on 30.6.2012 were :
A Ltd.
Rs. 1577520
B Ltd.
Rs. 1671480
3. Provision for taxation based on profits for the year is to be made as follows :
A Ltd.
Rs. 2700000
B Ltd
Rs. 1944000
4. A Ltd. Purpose to pay final dividend on Equity Shares at 25%.
5. B Ltd. Purpose to pay half years dividend on preference Shares and final dividend on Equity
Shares at 30%.
6. B Ltd. sold to A Ltd. in March 2012 material worth Rs. 750000 at cost plus 25% of which A Ltd.
still had unsold stock of Rs. 520500 as on 30.6.2012.
Your are required to:
Prepared Consolidated Profit and Loss Account of A Ltd. and its subsidiary B Ltd. for the year
ended on 30.6.2012. Show your calculation for:
a. Minority Interest (in profit)
b. Capital Reserves
c. Provision for unrealized Profits.

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Profits & Losses Statement for the year ended 30th June, 2013
Rupees in 000
Particulars

Note No.

Figures for
the current
reporting

I
II
III
IV

V
VI
VII

Revenue from Operation

Other Income
Total Revenue ( I+II)
Purchase of Stock-in Trade
Changes in Inventories of Finished Goods

1
2
3
4

Work-in-Progress and Stock-in-Trade:

Other Expenses
Total Expenses
Profit before Tax
Provision For Tax
Profit (Loss) for the Period (XI+XIV)

Reserves and surplus

Profit and Loss A/c :

A Ltd.

Period
30.7560
Nil
30.750
16.900.260
(550.260)
5040.000
21390.000
9360.000
4644.000
4716.000

481.500

B Ltd. 576.000
1057.500
Add: Net Profit for the year :
A Ltd.
2340.000
B Ltd.

2376.000

4716.000
5773.500

Less : Appropriation
Interim Dividend
Equity

2070.000
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32

Preference
Proposed Dividend :
Equity
Preference
Capital Profit
Minority Interest
Provision for unrealised Profit

81.000
1620.000
40.500
613.125
247.500
104.1004776.225

Balance carried to balance Sheet

997.275

Notes to Statement of Profit & Loss

1.
-

Rs. In 000

Revenue From Operation

A Ltd.
B Ltd

16,200.000
15,300.000
31,500.000
750.000
30,750.00

Less: Inter Company sales

2.
3

Other Income
Dividend Receivable
Less: Inter company Transaction
Purchases
A Ltd.
B Ltd
Less: Inter Company Transaction

CHAPTER
IX

850.500
850.500
8,963.820
8,686.440
17,650.260
750.000
16,900.260

Changes in Inventories
Opening Stock : A Ltd.
B Ltd
Closing stock
A Ltd.
B Ltd
Net Increase
Other Expenses
Overheads Expenses
A Ltd.
B Ltd.
Selling Expenses A Ltd.
B Ltd

893.700
1805.040
1577.520
1671.480
.
2070.000
945.000
810.000
1215.000

2698.740
3249.000
550.260

3015.000
2025.000

CONCLUSION

Two companies are considered to be related companies when one controls the other company.

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Consolidated financial statements are generally considered to be more useful than the separate
financial statements of the individual companies when the companies are related.
Whether the subsidiary is acquired or created, each individual company maintains its own accounting
records, but consolidated financial statements are needed to present the companies together as a single
economic entity for general-purpose financial reporting.
Consolidated financial statements are presented primarily for the benefit of the shareholders, creditors,
and other resource providers of the parent.
Significantly, consolidated financial statements often represent the only means of obtaining a clear
picture of the total resources of the combined entity that are under the control of the parent company.
While consolidated financial statements are useful, their limitations also must be kept in mind.
Some information is lost any time data sets are aggregated; this is particularly true when the
information involves an aggregation across companies that have substantially different operating
characteristics.

CHAPTER- X

BIBIOGRAPHY
www.icai.com
www.mca.gov.in
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34

www.advancefinancialaccounting.com

Books
Advance financial accounting book of Seth publication

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35