Corporate Accounting and Financial Management · Consolidation of Accounts

How to Prepare a Consolidated Profit and Loss Statement

Updated 11 October 2026 · Fact-checked

A consolidated statement of profit and loss shows the income and expenses of the parent and its subsidiaries as one entity. You add like items line by line, eliminate intragroup transactions and unrealised profit in full, then split the profit between the owners of the parent and the non-controlling (minority) interest.

Understand Consolidated Profit and Loss Statement

A parent company and its subsidiaries are separate legal entities. But the group acts as one business. The consolidated statement of profit and loss shows the group's results as if it were a single economic entity.

The starting point is simple. You combine like items of income and expenses of the parent and each subsidiary, line by line. Sales are added to sales, wages to wages. Ind AS 110 (para B86) and AS 21 (para 13) both require this.

Then you remove what the group did only with itself. If the parent sells goods to a subsidiary, the group has not sold anything to an outsider. So that sale and the matching purchase are eliminated. Profit left unsold in closing stock is also removed, because the group cannot earn a profit by selling to itself. Ind AS 110 says profits from intragroup transactions recognised in assets such as inventory and fixed assets are eliminated in full.

A subsidiary's results come into the group from the date control starts until the date it ends (Ind AS 110 para B88; AS 21 para 22). So if you buy a subsidiary mid-year, only its post-acquisition income and expenses go in.

Finally, the profit is shared. Part belongs to the owners of the parent. Part belongs to the outsiders who hold shares in the subsidiary. Ind AS 110 calls them non-controlling interests. AS 21 calls them minority interests. The minority share of profit is shown as a deduction to reach the profit attributable to the parent's owners.

Key rules to remember

Line-by-line combination: Group item = Parent item + Subsidiary item (post-acquisition) − intragroup amounts; Applies to every income and expense line. Only the period of control is included.
Intragroup sales and purchases: Eliminate the inter-company sale from Revenue and the same amount from Purchases (cost of materials); Both sides are removed by the same amount. Profit is not affected by this entry alone.
Unrealised profit in closing stock: Unrealised profit = Closing stock from group company × Profit % on selling price (or Markup ÷ (100 + Markup) if profit is on cost); Reduce group profit and group closing stock by this amount. Ind AS 110 (para B86(c)) requires elimination in full.
Adjusted profit of the subsidiary: Subsidiary adjusted profit = Reported profit − unrealised profit on its sales to the parent (the seller bears it) − extra depreciation or other fair value adjustments; Ind AS 110 requires the unrealised profit to be eliminated in full. How it is split between parent and minority follows standard practice: if the subsidiary is the seller, the unrealised profit reduces its profit, so the minority bears its share. If the parent is the seller, the whole amount is charged to the parent's profit.
Minority share of profit: Minority share = Minority % × (Subsidiary adjusted profit − cumulative preference dividend payable to minority) + that preference dividend; Deduct from group profit to get profit attributable to owners of the parent. If the subsidiary has cumulative preference shares classified as equity and held by the minority, adjust the subsidiary's profit for their dividend first, whether or not declared (Ind AS 110 para B95). Compute the share on the profit left, then add the minority's own preference dividend.
Parent's share: Profit attributable to parent owners = Consolidated profit − Minority share; Check: parent's own profit (adjusted) + parent % × subsidiary adjusted profit gives the same answer.

How to solve Consolidated Profit and Loss Statement questions

Use the same order for every question. It keeps the working clean and lets the examiner award step marks.

1Note the date of acquisition and the year-end. Find the period for which the subsidiary's results are included. If control began mid-year, time-apportion the subsidiary's profit unless the question says otherwise.
2Write both companies' income and expense figures side by side. Add like items line by line.
3Identify all intragroup transactions: sales, purchases, interest, rent, management fees, dividends. Remove each from both the income side and the expense side.
4Find unrealised profit on unsold closing stock (and opening stock if given). Reduce closing stock and profit. Do the same for any fixed assets sold within the group, adjusting depreciation.
5Make other adjustments the question gives, such as extra depreciation on fair value uplift or proposed dividend treatment.
6Work out the subsidiary's adjusted profit. Multiply by the minority percentage to get the minority share.
7Show consolidated profit, deduct minority share, and state the profit attributable to the owners of the parent. Show working notes clearly.

Quickest way: Adjust, then split

When to use it: Use this when the question asks only for profit attributable to the parent and minority share, with no full statement needed.

Adjust the subsidiary's profit first: subtract unrealised profit on its sales to the parent and any fair value depreciation.
Adjust the parent's profit: subtract unrealised profit on its sales to the subsidiary.
Minority share = minority % × adjusted subsidiary profit.
Parent's share = adjusted parent profit + parent % × adjusted subsidiary profit.
Check that the parent's share plus minority share equals total adjusted profit of the group.

Common mistakes in Consolidated Profit and Loss Statement

Eliminating only the sales and forgetting the purchases (or the other way round).
Students treat the sale as one entry instead of a pair.
Fix: Always cut the same amount from revenue and from purchases. Tick both off in your working.
Removing the whole inter-company sale value as unrealised profit.
Confusing the sale value with the profit in it.
Fix: Unrealised profit applies only to the goods still unsold at year end, and only to the profit element of them.
Charging the unrealised profit wrongly when the cost-based markup is given.
Applying markup percentage directly to stock value.
Fix: If profit is on cost, use markup ÷ (100 + markup) of the selling price. For 25% on cost, the profit is 25/125 = 1/5 of the stock value.
Calculating minority share on reported profit without adjusting for unrealised profit when the subsidiary is the seller.
Students adjust only the group total.
Fix: When the subsidiary sells to the parent, deduct the unrealised profit from the subsidiary's profit first. Then apply the minority percentage.
Including the full year of the subsidiary's results when it was acquired mid-year.
Ignoring the control date.
Fix: Include only results from the date control starts, as Ind AS 110 para B88 and AS 21 para 22 require.
Treating the subsidiary's dividend paid to the parent as group income.
It appears as income in the parent's books.
Fix: It is an intragroup flow. Remove it from the group's income. Only dividends paid to outsiders matter.

Worked examples

Example 1

H Ltd holds 80% of S Ltd since the start of the year. For the year, H Ltd's revenue is ₹8,00,000 and S Ltd's is ₹3,00,000. H Ltd's purchases are ₹5,00,000; this figure includes the ₹1,00,000 cost of the goods that H Ltd sold to S Ltd. S Ltd's purchases from outsiders are ₹1,80,000, in addition to the goods bought from H Ltd. Other expenses are ₹1,00,000 (H) and ₹60,000 (S). H Ltd sold goods costing ₹1,00,000 to S Ltd for ₹1,25,000, and this sale is included in H Ltd's revenue of ₹8,00,000. S Ltd still holds all of these goods at year end and shows them as closing stock at ₹1,25,000. Opening stock is nil for both companies. H Ltd has no closing stock and S Ltd has no other closing stock. Find the consolidated profit and the minority share. Ignore tax.

Show the solution

Step 1: Separate profits. H has no stock, so all its purchases are expensed: 8,00,000 − 5,00,000 − 1,00,000 = ₹2,00,000. S: total purchases are 1,80,000 (outsiders) + 1,25,000 (from H) = ₹3,05,000. Less closing stock of ₹1,25,000, its cost of goods sold is ₹1,80,000. S profit = 3,00,000 − 1,80,000 − 60,000 = ₹60,000.
Step 2: Intragroup sale. H's sale of ₹1,25,000 is in revenue and is S's purchase from H. Revenue is reduced by ₹1,25,000. Purchases are reduced by ₹1,25,000. This pair of entries has no effect on profit.
Step 3: Combined revenue = 8,00,000 + 3,00,000 − 1,25,000 = ₹9,75,000. Combined purchases = 5,00,000 + 3,05,000 − 1,25,000 = ₹6,80,000. This is the group's purchases from outsiders: H's 5,00,000 plus S's 1,80,000. Combined other expenses = 1,00,000 + 60,000 = ₹1,60,000.
Step 4: Unrealised profit. All the goods are unsold, so unrealised profit = 1,25,000 − 1,00,000 = ₹25,000. H is the seller. This profit sits in H's separate profit of ₹2,00,000, and removing the sale and purchase does not reverse it. S's books carry the goods at ₹1,25,000, but the group must show them at cost to the group, ₹1,00,000. Closing stock is therefore reduced by ₹25,000.
Step 5: Group profit, method 1 (statement). Cost of goods sold = combined purchases 6,80,000 − closing stock at group cost 1,00,000 = ₹5,80,000. Consolidated profit = 9,75,000 − 5,80,000 − 1,60,000 = ₹2,35,000.
Step 5A: Group profit, method 2 (check). Separate profits 2,00,000 + 60,000 = 2,60,000, less unrealised profit 25,000 = ₹2,35,000. Both methods agree.
Step 6: Minority share. H is the seller, so the unrealised profit is charged wholly to H and S's profit is unchanged at ₹60,000. Minority = 20% × 60,000 = ₹12,000.
Step 7: Profit attributable to owners of H = 2,35,000 − 12,000 = ₹2,23,000. Check: H adjusted 2,00,000 − 25,000 = 1,75,000, plus 80% × 60,000 = 48,000. Total ₹2,23,000.

Answer: Consolidated profit is ₹2,35,000. Minority share is ₹12,000. Profit attributable to the owners of H Ltd is ₹2,23,000.

Example 2

P Ltd holds 75% of Q Ltd, acquired at the start of the year. P Ltd's profit for the year is ₹4,00,000 and Q Ltd's profit is ₹2,00,000. During the year Q Ltd sold goods to P Ltd for ₹1,20,000 at a profit of 25% on selling price. One-half of these goods remain in P Ltd's closing stock. Find the profit attributable to the owners of P Ltd and the minority share. Ignore tax.

Show the solution

Step 1: Stock still held = 1,20,000 × 1/2 = ₹60,000.
Step 2: Profit on selling price is 25%, so unrealised profit = 25% × 60,000 = ₹15,000.
Step 3: Q Ltd is the seller. Its adjusted profit = 2,00,000 − 15,000 = ₹1,85,000.
Step 4: Minority share = 25% × 1,85,000 = ₹46,250.
Step 5: Parent's share of Q's profit = 75% × 1,85,000 = ₹1,38,750.
Step 6: Profit attributable to P Ltd's owners = 4,00,000 + 1,38,750 = ₹5,38,750.
Step 7: Check. Consolidated profit = 4,00,000 + 1,85,000 = ₹5,85,000. Less minority 46,250 gives ₹5,38,750.

Answer: Minority share of profit is ₹46,250. Profit attributable to the owners of P Ltd is ₹5,38,750. Consolidated profit is ₹5,85,000.

Exam tips

Show a working note for each adjustment: intragroup sales, unrealised profit, minority share. ICSI answers are marked on steps.
Always say who the seller is. It decides whether the minority shares the unrealised profit burden.
Check the date of acquisition. Mid-year acquisition means only post-acquisition profit goes into the consolidated statement.
End with a clear line: consolidated profit, minority share, and profit attributable to owners of the parent. Cite Ind AS 110 or AS 21 where you explain why you eliminated an item.
Read for cumulative preference shares held by outsiders. Their dividend is deducted before the minority share is computed.

Practice questions from Consolidation of Accounts

Consolidated Profit and Loss Statement in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Consolidated Profit and Loss Statement: frequently asked questions

Why do we eliminate inter-company sales in the consolidated profit and loss?

The group has not sold anything to an outsider in such a sale. Ind AS 110 requires intragroup income and expenses to be eliminated in full so the statement shows the group as a single economic entity.

How do I calculate minority share of profit?

Take the subsidiary's profit for the period of control, adjusted for unrealised profit it made on sales to the parent and for any fair value adjustments. Multiply by the minority's percentage holding.

Does unrealised profit affect the minority share?

Only when the subsidiary is the seller. Then the unrealised profit reduces the subsidiary's profit, and the minority bears its share. If the parent is the seller, the full amount reduces the parent's profit.

What is the difference between AS 21 and Ind AS 110 here?

AS 21 uses the term minority interests and Ind AS 110 uses non-controlling interests. Both combine line by line, eliminate intragroup items and include a subsidiary only from the date of control. Ind AS 110 states that intragroup profits in assets are eliminated in full.