Consolidating accounts examples

If, say, you buy one of your suppliers, do you still report buying supplies as an expense?Does the subsidiary count as an asset on your balance sheet?

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There are three accounting methods for this situation, cost, equity and consolidation.The one you use depends on how big a stake you have in the other business.Over the course of his career, Fraser Sherman has reported on local governments, written about how to start a business and published four books of film reference.He lives in Durham NC with his awesome wife and two wonderful dogs.In conclusion, the chart of account is useful for analyzing past transactions and using historic data to forecast future trends.

Below is an example of chart of accounts that may be used to set up the general ledger of most companies.

In addition, you may customize your COA to your industry by adding to the Inventory, Revenue and Cost of Goods Sold sections to the sample chart of accounts. Each company’s chart of accounts may look slightly different.

But if you are starting from scratch, the following is great place to start.

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If your business invests in another business, keeping the books becomes even more complicated.

The only time you can use this approach is if you purchased 20 percent or less of the other company.