consolidated financial statement

What’s the problem?

I lend money to you, $10,000 at 10%, on day 1 on the accounting year

In my records that’s:

Dr Loan receivable $10,000
Cr Cash $10,000

At the end of the year, you have either paid me $1,000 interest or you still owe it to me

Dr Cash (or Receivable) $1,000
Cr Investment income / Finance income / loan interest receivable … whatever you want to call it $1,000

In the financial statements at the year end I shall show on the statement of financial position an asset of $10,000 for the loan and possibly also $1,000 for the interest still to be received

In the statement of profit or loss I shall show Investment income / Finance income / loan interest receivable of $1,000

That’s me done

In your records you’ll have the mirror image:

Dr Cash $10,000
Cr Loan payable $10,000

At the end of the year, you have either paid me $1,000 interest or you still owe it to me

Dr Finance costs $1,000
Cr Cash / loan interest payable $1,000

In the financial statements at the year end you shall show on the statement of financial position a liability of $10,000 for the loan and possibly also $1,000 for the interest still to be paid

In the statement of profit or loss you shall show Finance costs / loan interest payable of $1,000

So, on my SoFP I have an asset of $10,000 and on your SoFP there is a liability of $10,000

Cancel when preparing the consolidated SoFP

And on my SoPoL I have an income of $1,000 and on your SoPoL there is an expense of $1,000

Cancel when preparing the consolidated SoFP

OK?