Definition of Balance Sheet
A Balance Sheet (Also see Introduction of Balance Sheet) is a review of the financial status of a business at a specific time. It is a fundamental part of the financial statement (Also see Introduction to Financial Statements ) together with the statement of cash flows and income statement. The Balance Sheet shows how effectively the funds of the company could be used to achieve the maximum benefit. (Also see Ways to Increase Your Business Revenue)
In other words, it is an overview of the financial status of the business, identifying the liabilities owed, assets owned, and the owner’s equity. Here is the Balance Sheet Equation:
The Balance Sheet Equation
The Balance Sheet is used to evaluate and examine the liquidity and solvency of the issue. It is utilised as a measurement to compare the present and past performance of the business, and to forecast its future possibilities. ( Also see )Basically, the Balance Sheet is generated at a particular date, which is normally during the completion of the accounting duration, i.e. 30th June. Some business might prepare the Balance Sheet — semi-annually or quarterly.
Definition of Consolidated Balance Sheet
Consolidated Balance Sheet is the document that consists of a company’s assets, liabilities and equity and its subsidiaries. In short, it is a consolidation of the balance sheet that belongs to the parent company with the subsidiaries.
The Consolidated Balance Sheet is produced like a normal Balance Sheet; there is no difference made for which liability or asset comes from which company. It offers an accurate and compact image of the financial status of the whole company. The Consolidated Balance Sheet is prepared at a particular date, which is usually at the completion of the fiscal year. The Balance Sheet ( Also see Accounting – Preparation of Balance Sheet ) formula is the same as above in Normal Balance Sheet.
You might be questioning the subsidiary company and holding company. The holding company has more than 51% of total share capital, or it manages the proportion of its Board of Directors (BOD). The holding company has the right to assign or eliminate the directors in other company. Whereas the subsidiary company has more than 51% share capital held by another company or its composition of BOD is managed by another company.
If you are still unsure about the use of the Balance Sheet and the Consolidated Balance Sheet, do not hesitate to reach out to accounting firm in Johor Bahru for further guidance.