Both small businesses and large corporations need to have financial statements for tax purposes. Your financial statements are the written records showing the financial health and performance of your business. Financial statements typically include:
- Balance sheet – This shows your equity after subtracting liability from your assets.
- Income statement– This is your profit and loss statement that shows your net profit after your expenses.
- Cash flow statement – This sheet outlines where and how money is entering and leaving your business.
For business owners that operate several different businesses with multiple subsidiaries, there are two ways of looking at the data: consolidated financial statements or combined financial statements. Let’s take a look at each type of financial statement.
Understanding Consolidated Financial Statements
A consolidated financial statement takes the income statement, balance sheets, and cash flow statements and any other data that’s needed, of a company plus all of its subsidiaries, divisions, or sub-organizations.
It may sound confusing to have three large financial statements that take a comprehensive look at all of the holdings. But, by consolidating the statements, investors and lenders get a clear view of how the corporation as a whole is performing and if they are a safe investment.
Understanding Combined Financial Statements
Combined financial statements show the individual results of each subsidiary of the parent company. The statements are typically all published concurrently, but they are broken down by subsidiary.
While investors and lenders can see an aggregate of the health of the company in a consolidated statement, the combined financial statements allow the investor to see the financial health of each individual operation. On both the combined and consolidated statements, inter-company transactions are eliminated. For example, if the larger company loans money to one of its subsidiaries or takes in royalties from a subsidiary, those transactions are not included to prevent double counting and misrepresenting transactions.
Financial Statements for Small Businesses
Small businesses may need combined and consolidated financial statements. If you have an LLC or have incorporated your small business, your financial statements must be shown to creditors, lenders, and to the IRS with your tax returns. If you have multiple businesses, like a plumbing company and a plumbing supply shop, and they operate under the same LLC or corporation, you’ll need consolidated or combined financial statements.
Contact Us for Financial Statement Preparation in Maryland
We have a team of experienced CPAs who work with small business owners in the DC Metro Area, providing a variety of accounting and bookkeeping services, including financial statement generation. If you want to ensure accurate statements for all of your holdings, reach out to us today!
Trust the Professionals at Goldin Group
At Goldin Group LLC, we understand that as a business owner, keeping up with accounting and taxes is time-consuming and can even be overwhelming. That’s where we can help! We work with individuals and businesses in Maryland (DC Metro Area), offering a variety of financial services designed to save you time and lower your tax burden. If you are a small business that is looking to outsource your accounting or if you need help managing any aspect of your business’s or nonprofit’s finances, we want to hear from you. Call us at (301) 913-0008 or email firstname.lastname@example.org to make an appointment.