Elimination entries

[Shashi_k]

Hi,

what is elimination in regard to Consolidation, Why we need eliminate any entries at the time of consolidation can any one please explain with some live scenario.

Regards,
Shashi.

[garyg]

Very simple. Imagine you have company A and company B in chart of accounts. When you consolidate both companies A & B, you do not want to inflate the numbers.

Example A sold 1 Million to B. This means B Purchased 1 Million from A.

When you consolidate we should not see any sale or purchase. Otherwise the consolidated results show 1 Million as Purchases, 1 Million as Sales, but in fact it is not a sale or purchase for consolidated company.

[Shashi_k]

Thanks Gary

[abhgaur@gmail.com]

Through Elimination entries you eliminate
a) Intercompany a/c balances
b) Intracompany a/c balances
c) Investment Equity (incase if ur subsidary is not 100%)