How consolidation works
Each entity in a group closes its own books first, then the results are combined line by line, revenue with revenue, assets with assets, across every entity in the structure. Ownership percentages matter here, a wholly owned subsidiary consolidates in full, while a partially owned one may require a minority interest adjustment on the combined statements.
Once combined, intercompany sales, loans and balances between entities in the group are eliminated so they do not inflate consolidated revenue, assets or liabilities with activity the group had only with itself. The result is a set of financial statements showing the group's position and performance as if it were one company dealing only with outside parties.
Example
A group with a US parent and a Canadian subsidiary closes both entities' books for the month. The parent reports $800,000 revenue and the subsidiary reports $300,000, but $50,000 of that subsidiary revenue came from selling to the parent directly. After eliminating that intercompany $50,000, consolidated revenue for the group is reported as $1,050,000, not $1,100,000, avoiding the double count.
Consolidation in QuickBooks Online vs Xero
Not software-specific. Neither QuickBooks Online nor Xero consolidates multiple entities natively, so multi-entity groups typically use a consolidation tool such as Syft Analytics or Fathom layered on top to combine entities and eliminate intercompany balances between them.
Common mistakes
- Intercompany sales and balances are combined into group totals without being eliminated, inflating consolidated revenue, assets or liabilities with activity the group only had with itself.
- A partially owned subsidiary is consolidated as if it were wholly owned, skipping the minority interest adjustment the ownership percentage actually requires.
- Each entity closes on a different schedule, so consolidated statements combine figures from periods that do not actually line up with each other.
Why it matters
Consolidation is what lets an owner, lender or investor see a multi-entity group's true combined position, but only if intercompany activity is properly eliminated first. Skipping eliminations or consolidating ownership percentages incorrectly inflates the group's reported size and can mislead decisions based on those numbers. For groups with subsidiaries, accurate consolidation keeps group-level financial statements a fair reflection of performance with outside parties, not internal activity.
Related terms
How LedgerBPO handles consolidation
We close each entity's books, confirm intercompany balances match across the group, and prepare consolidated figures with eliminations applied, so group-level financial statements are ready for review without manual spreadsheet work.