Consolidated balances and Combined balances

The difference between consolidated balances and combined balances, as they serve different purposes in financial reporting.

### Consolidated Balances

Consolidated balances are used when a parent company prepares financial statements that include its subsidiaries. The financial information of the parent company and its subsidiaries is combined into a single set of financial statements, as if they were a single entity. This method eliminates intercompany transactions and balances to provide a comprehensive view of the group's financial position and performance.

Example: Imagine Company A owns 80% of Company B and 60% of Company C. In the consolidated financial statements, Company A will report its own assets, liabilities, and equity, along with those of Company B and Company C, as if they were one entity. Intercompany transactions between Company A, B, and C are eliminated to avoid double counting.

### Combined Balances

Combined balances, on the other hand, present the financial information of multiple entities together, but each entity's financial information is reported separately. This method is often used for internal analysis and allows users to analyze the financials of each company individually.

Example: Using the same companies as above, in combined financial statements, Company A, Company B, and Company C would each have their own separate financial statements presented together in one document. This allows stakeholders to see the financial performance of each entity independently.

### Key Differences

- Scope: Consolidated balances include the parent company and its subsidiaries, while combined balances include multiple entities under common control but keep their financials separate.

- Intercompany Transactions: Consolidated balances eliminate intercompany transactions, whereas combined balances do not.

- Purpose: Consolidated balances are typically used for external reporting, while combined balances are more for internal analysis.

Understanding these differences helps auditors ensure that financial statements are prepared accurately and in compliance with relevant accounting standards.