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Balance Sheet Vs Consolidated Balance Sheet

Commerce

Balance Sheet Vs Consolidated Balance Sheet

Reviewed by:

Dimple Tiwari

Balance Sheet and Consolidated Balance Sheet - Is it the Same?

Students pursuing Accountancy in the field of Commerce must have come across the process of preparing of Balance Sheet, also they are introduced to Consolidated Balance Sheet. Preparing a balance sheet is pretty simple, all you need is to figure the company’s assets, liabilities, and the shareholder’s equity. While in the case of the consolidated balance sheet, you need to include other items, for example - minority interest.

In this section, we will know about the balance sheet and consolidated balance sheet. We will further discuss the Standalone vs. Consolidated Balance Sheet and Consolidated Balance Sheet vs. Balance Sheet.

Balance Sheet Vs. Consolidated Balance Sheet

To briefly differentiate, we can say there is a fine difference drawn between the balance sheet and the consolidated balance sheet. The difference lies in the way how both are prepared. The balance sheet is being prepared by all companies as it is one of the major financial statements. While the consolidated balance sheet is not being prepared by all the companies, only the companies who have shares in other companies (known as subsidiaries) need to prepare this consolidated balance sheet.

To get a grip on the difference between balance sheet and consolidated balance sheet, students are required to study the difference chart in our prevailing section. Before that, let us know what is a Balance Sheet and what is a consolidated Balance Sheet.

What is a Balance Sheet?

A Balance sheet is a precise snapshot of the representation of the assets, equity, and liabilities of an entity. The Balance Sheet is the outline mark of every enterprise which represents the financial position of the business.

As known, there are three main components of a Balance Sheet, namely the assets (which includes the inventory, accounts receivable), equity (including the share capital, capital surplus), and liability (they are - accounts payable, customer deposits).

What is a Consolidated Balance Sheet?

When the assets, liabilities & equity of a firm are merged with its subsidiaries, a single report is prepared, this report is termed as ‘Consolidated Balance Sheet’. In other words, it is a consolidating of two balance sheets - one of the company’s another of its subsidiaries.

Difference between Balance Sheet Vs. Consolidated Balance Sheet

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An illustration depicting balance sheet vs consolidated balance sheet

Point of Difference	Balance Sheet	Consolidated Balance Sheet
Meaning	A balance sheet is known as the precise financial statement which represents an organization’s assets and liabilities. The balance sheet reveals the financial security of the enterprise.	When the assets, liabilities, and the equity of the firm and its subsidiaries are merged into one balance sheet it gives rise to a consolidated balance sheet.
Preparation	Quite simple	A bit difficult
Who prepares it?	All the entities must prepare it.	Only those entities which have subsidiaries of their own.
Objective of preparing	Showcase the accurate financial position to the external stakeholders.	The main objective is to reflect the accurate financial position of the organization and its subsidiary.
The scope	The scope of the balance sheet is not only limited but also narrow.	Much broader in terms of scope.
Equation	Assets = Liabilities + Shareholders’ Equity	Assets of the parent and subsidiary = Liability (parent and subsidiary) + Shareholders’ equity + Minority Interest.
Pre-requisite of its preparation	A proper data of assets and liabilities.	First, the parent company must have more than 50% of the share in its subsidiary to prepare a consolidated balance sheet.

Standalone Vs Consolidated Balance Sheet

Here, we will learn about the standalone balance sheet and will also know how different it is from a normal balance sheet under the consolidated vs. the standalone balance sheet.

Standalone Balance Sheet

Standalone balance sheets are the financial statements of a single company. These statements represent the position of the assets and liabilities of the holding company which functions alone, this is done without considering the impact of the assets and liabilities of the subsidiary companies.

The standalone financial statements reflect the financial performance of the holding company which goes irrespective of the financial performance of their subsidiaries.

Consolidated Balance Sheet

Consolidated balance sheets are known as the financial statements which are drawn up when the individual financial statements are stated of all the subsidiary companies. They are combined with the standalone financial statements of the holding company.

Consolidated financial statements reflect the financial performance and position of assets and liabilities of the entire group of the company as a whole (along with their subsidiaries).

The Difference between a Standalone Balance Sheet and a Consolidated Balance Sheet are as below:

Point of Difference	Standalone Balance Sheet	Consolidated Balance Sheet
What is the meaning?	This is the financial statement of an individual company.	They are the financial statements of multiple companies which are held together – they are the holding company and the subsidiaries.
Financial Representation	Of a single company.	Of the entire branch.
Reporting done by	All the companies	Only by holding companies who have one or more subsidiaries.
How is equity represented?	Only via shareholders’ interest.	Shareholders’ interest + Minority Interest
Relevance for tax compliances	More relevant	Less relevant.
Order of its preparation	Prepared first	Prepared after the standalone balance sheet.

Consolidated Statement of Financial Position vs Balance Sheet

While preparing the standalone financial statements is quite a simpler process of reporting the assets and liabilities of a company from their base books of accounts, preparing the consolidated financial statements is even more complex. Preparing the consolidated financial statements requires the knowledge of advanced accountancy and also the knowledge of the consolidation rules. A consolidated statement of financial position is especially relevant to the group companies that have several other subsidiaries under them.

FAQs on Balance Sheet Vs Consolidated Balance Sheet

Q1. What is the Purpose of the Consolidated Balance Sheet?

Ans. The main and dominating purpose of the consolidated statements is to present, the benefit of the shareholders and the creditors of the parent company. The operations and the financial position of the parent company and its subsidiaries are very much essential as if the group resembled a single company with one or more branches or divisions of it.

Q2. Under the GAAP System, a Consolidated Balance Sheet is Required?

Ans. The general rule or GAAP requires the consolidation of financial statements or balance sheets. GAAP says when one company's ownership interest is diverted in another business providing it with a majority of the voting power (meaning it controls more than 50 percent of the subsidiary company’s voting shares) the holding company is required to maintain a consolidated balance sheet.

Q3. What is a Standalone Company?

Ans. A stand-alone business or a standalone company or organization is independent and it does not receive any financial support from any other organization. They plan to relaunch it as a stand-alone company in the market.