Company consolidating entry inter
Focusing on the income statement, let’s say (for absolute simplicity) that ACME sells 1000 widgets at a price of .00 each and a cost of .00 each. This creates more complexity because the manufacturing entity must “sell” widgets to the new retail entity.Its income statement would look like this: Everyone’s happy. Let’s assume ACME sells 1000 widgets to its wholesale customers and another 500 widgets through its retail channel.
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As companies grow, structures get complex, and multiple levels of consolidation must occur.
While some people stick with an Excel solution as long as possible, it just isn’t trustworthy.
A few additional things to note: We recommend keeping separate accounts for intercompany and external company transactions. Too often, intercompany and external transactions are mixed together, either because systems are inadequate or not set up appropriately. And in many companies, even mid-size ones, no one pays much attention to them.
Often, outside accountants create the consolidated financial statement and only the CFO Controller and/or the bank looks at it.
Often, when people “upgrade” from Excel to a real system, they discover that what they thought was working, wasn’t. Setting Up Intercompany Costs In our example, widgets were sold at the same price to outside wholesalers and the company-owned retailer. There are all kinds of reasons management may want different intercompany prices.