Balance Sheet is a statement that displays the company’s financial status on a particular date, by tabulating the assets, liabilities and equity. It is utilised to signify the ownership and owing of the business, at a specific time. It plays an essential role in showing the financial health of the company and helping the users to make reasonable decisions (Also see Type of Common Accounting Errors). It is not precisely same as a consolidated balance sheet.
Consolidated Balance Sheet shows the combined form of the information of owing and ownership of the holding company and the subsidiary company. In this blog, you will discover the difference between the balance sheet and the consolidated combined balance sheet.
Significant Differences Between the Balance Sheet and the Consolidated Balance Sheet
1. A Balance Sheet is a document of the financial situation of a company, while a Consolidated Balance Sheet is a statement showing the financial status of more than one company in the same group taken together.
2. To prepare the Balance Sheet, it is relatively more straightforward than preparing the Consolidated Balance Sheet.
3. Every company creates the Balance Sheet while the Consolidated Balance Sheet is only for the company that has subsidiary.
4. The Balance Sheet points out the liabilities and assets, including the goodwill, of the company, while the Consolidated Balance Sheet does not individually mention which assets own by which company.
It is compulsory to prepare the Balance Sheet for every company since it is a fundamental part of the financial statement. The Balance Sheet is a succinct summary of the company’s efficiency, solvency and liquidity (Also see Accounting – Basic Financial Ratios). It is the choice of the company to utilise a standalone Balance Sheet or a Consolidated Balance Sheet.
If you wish to understand the overall productivity of the entire group, then you should opt for the Consolidated Balance Sheet. On the other hand, you should choose a standalone Balance Sheet if you need to know the performance of each company.
Do not hesitate to seek guidance from any accounting service in Johor Bahru for further information regarding the use of the Balance Sheet and the Consolidated Balance Sheet.