Start with the same date and the same accounts
Every entity must report as of the same date. A trial balance from the end of September cannot be combined with one from the end of October. Pull each entity's trial balance on the same cut-off after its books are reconciled.
Then compare the charts of accounts. If one company calls an account 'Sales' and another 'Revenue', decide on a single name and map each entity's accounts to it. A mapping table, written once and reused every period, saves hours.
Put the entities side by side
Lay out one row per mapped account and one column per entity, with the trial balance amounts as they stand. Keep debits as positive and credits as negative, or the reverse, but use one convention throughout. Add a total column that is simply the sum across.
At this stage the total is not the answer. It is the starting point, before anything is adjusted or removed. Check that every entity's column adds to zero before you go on, because a trial balance that does not balance means the problem is in that entity's books.
Find the intercompany balances
Look for accounts that exist only because the companies deal with each other: loans between them, management fees, shared expenses paid by one on behalf of another, sales from one to another. Each has a matching entry on the other side. Company A's receivable from B should equal B's payable to A.
If they do not agree, find out why before eliminating anything. Common causes are timing, an item booked by one side only, or a different amount recorded. Fix the books of the entity that is wrong rather than forcing the elimination to balance.
Apply eliminations and adjustments in their own columns
Do not overwrite the entity numbers. Add separate columns for adjustments and eliminations, so a reviewer can see what was changed and why. An elimination removes the matching pair, such as the receivable and the payable. An adjustment fixes something that belongs only to the combined view, such as an accrual the entities did not book.
Label every entry with a short reason. Months later, a note that says 'eliminate management fee, Co A to Co B' is worth far more than a number with no explanation.
Check the result before you hand it over
The combined column should still balance to zero. The intercompany accounts should be zero or explained. Compare the combined income to the sum of the entities less the eliminated sales and costs, and confirm the difference matches what you eliminated.
A workbook that recalculates, so that changing an entity's number flows through to the combined result, makes this check quick. The Excel Consolidation and Markup Script on this site produces that kind of workbook, but the logic above applies whatever tool you use.
When to ask a professional
Consolidation for outside reporting, loans or audits can bring specific rules, especially where ownership is partial or the entities are not wholly owned. Ask your CPA how those apply to your situation. This guide describes the mechanics, not what your reports must contain.
Common questions
Do I need consolidation if I only own two small companies?
Only if you or a lender want a single combined picture. For tax, each entity usually files separately, so ask your accountant what you need.
What if the intercompany balances do not agree?
Find the cause first, such as timing or a one-sided entry, and correct the books that are wrong. Do not force the elimination.
Can I do this in Excel?
Yes. A sheet with one column per entity, plus separate columns for adjustments and eliminations, is enough for a small group.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.
