The balance sheet and consolidated balance sheet are almost similar to each other, but there is a difference between them in the terms of preparation. Both of them are the two major aspects of accounting and finance. In this article, we will get to understand the complete difference between them. This blog has the following main topics.
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Definition Of Balance Sheet
A balance sheet refers to the statements of liabilities, assets, equity, and capital of a business entity or any other organization at a particular point in time, detailing the balance of income and spending or expenditure over the preceding and foregoing time. These statements are actually prepared with the aim of measuring the financial position of a business entity on a certain fixed date. A balance sheet can be prepared at a particular date but not for a particular period. In a nutshell, a balance sheet actually shows the wealthiness of a business entity in financial terms.
The two major classifications of the balance sheet are
- Equity And Liabilities
Assets are further classified into,
- Current Assets- These are the assets that are readily converted into cash.
- Non-Current Assets- These assets assist the companies to operate their businesses.
The second category of the balance sheet statement is equity and liabilities. Equity generally shows how much value shareholders or owners can assert from the business. While, liabilities are the items like accounts payable(money a company will pay), shareholders’ equities, current and non-current liabilities, etc.
Definition Of Consolidated Balance Sheet
On the other hand, when the assets, liabilities, and equity of a holding firm/company and its subsidiaries are put together in a single data/report, then the report is known to be a consolidated balance sheet. In other words, we can say that a consolidated balance sheet is a fortification of the balance sheet and it is the true image of the financial status of the whole business entity and its subsidiaries(groups/departments).
For Example- Let’s suppose A limited is a company that owns a 53% share in B limited. So, here A limited is a holding firm or company while B limited is the subsidiary company of A limited.
Balance Sheet Vs Consolidated Balance Sheet(Table)
|Basis For Comparison
|Consolidated Balance Sheet
|A balance sheet refers to the statements that reveal the financial status of an enterprise or an organization.
|A consolidated balance sheet refers to the statements that show the financial condition of a company and its subsidiaries in an integrated way
|Ease Of Preparation
|All the entities
|Only those businesses which possess subsidiaries
The major difference between balance sheet and a consolidated balance sheet is that:
- A balance sheet refers to the statements of liabilities, assets, equity, and capital of a business entity or any other organization at a particular point in time, detailing the balance of income and spending or expenditure over the preceding and foregoing time. On the other hand, when the assets, liabilities, and equity of a holding firm/company and its subsidiaries are put together in a single data/report, then the report is known to be a consolidated balance sheet.
- The preparation of a balance sheet is easier and less time-consuming. On the other hand, the preparation of a consolidated balance sheet is comparatively difficult and more time taking.
- While the balance sheet precisely mentions the assets, equities, and liabilities of the company, the consolidated balance sheet does not describe as to which assets belong to which entity.
- The balance sheet can be prepared by any entity. whether it is a sole proprietorship or a corporation. On the other hand, only the companies having subsidiaries can prepare a consolidated balance sheet.
So with the above discussions, we can conclude that the balance sheet is a concise summary of the performance, profitability, liquidity, and solvency of a company. Both balance sheet and consolidated balance sheet are important at their own places. Those who want to know the overall performance of the whole group, prefer a consolidated balance sheet. On the other hand, to know the individual performance of every business entity, people go for the stand-alone balance sheet.