before preparing consolidated financial statements, in order to make the statements accurate, the accounting caliber of the parent company and its subsidiaries should be unified first. Unity is a unique quality requirement for the preparation of consolidated accounting statements. Without unified consolidated statements, consolidated data will be meaningless [3].

1) unify the accounting policies of the parent company and its subsidiaries in preparing individual financial statements. Accounting policy is the basis of accounting, and the accounting data calculated under different accounting policies will cause great differences, so it is necessary to unify accounting policies. Accounting policies include revenue recognition methods, asset valuation methods, cost valuation methods, and depreciation methods of fixed assets.

2) unify the final accounting date and financial period of the financial statements of the parent and subsidiary companies. The parent company shall, according to the final date and financial period of the parent company's own financial statements, adjust the financial statements of the two subsidiaries that are inconsistent with the parent company, and prepare consolidated financial statements with the adjusted financial statements of the subsidiaries.

3) unify the financial policies adopted by the parent company and subsidiaries, so that the financial policies adopted by subsidiaries are consistent with those adopted by the parent company. When the financial policies adopted by subsidiaries are inconsistent with those adopted by the parent company, the parent company shall make necessary adjustments to the company's financial statements in accordance with the financial policies stipulated by the parent company itself. However, if the difference is not significant and the impact on the financial position and operating results is not significant, the parent company can also directly use the financial statements to prepare consolidated financial statements.

4) In order to prepare consolidated financial statements, the equity capital investment made by the parent company to its subsidiaries must be accounted by the equity method, and individual financial statements should be prepared to provide basic data for the preparation of consolidated financial statements. The specific operation of accounting by the equity method is as follows:

(1) For the change of owner's equity caused by the current profit and loss of subsidiaries, the parent company should calculate and determine the amount it owns, and include it in the current investment profit and loss, and at the same time increase or decrease the long-term investment according to this amount, and adjust the book value of the long-term investment. When the parent company handles accounts, it debits the "long-term investment" account and credits the "investment income" account under the condition of increasing long-term investment; In the case of reducing long-term investment, debit the "investment income" account and credit the "long-term investment" account. When the subsidiary distributes profits, the parent company will no longer "change investment into profit" but treat it as a long-term investment reduction. According to the Accounting Standards for Business Enterprises-Investment, when accounting for long-term equity investment by the equity method, "the investment enterprise shall confirm the net loss of the invested entity to the extent that the book value of the investment is written down to zero" [31]. In this case, the investment loss confirmed by the parent company's book is not all that the parent company should share in the subsidiary's net loss according to its shareholding ratio, resulting in that the book value of long-term equity investment is greater than the part that the parent company should enjoy in the subsidiary's net assets according to its shareholding ratio. When compiling the merger offset entry to offset the parent company's long-term equity investment with the subsidiary's net assets, the difference must be reflected by the subject of "unconfirmed investment loss" and filled in the "unconfirmed investment loss" in the consolidated profit and profit distribution statement and consolidated balance sheet with positive and negative numbers respectively.

(2) The parent company shall calculate and determine the amount it has, increase or decrease the long-term investment according to the amount, adjust the book value of the long-term investment, and increase or decrease the amount of capital reserve for reasons other than the current profit and loss, such as accepting donations, revaluation and appreciation of legal assets, and accepting the difference of foreign currency investment translation. For the changes in the owner's equity of subsidiaries caused by the donation and statutory revaluation and appreciation of assets by the factor company, when the parent company conducts accounting treatment, the legal revaluation and appreciation of assets that are donated and confirmed shall be debited to the subject of "long-term investment" and credited to the subject of "capital reserve"; For the change of owner's equity caused by the factor company's acceptance of the translation difference of foreign currency investment, when the translation difference of foreign currency investment is the credit balance, the parent company should debit the account of "long-term investment" and credit the account of "capital reserve"; When the foreign currency translation difference is the debit balance, the parent company should debit the "capital reserve" account and credit the "long-term investment" account.

3.2 procedures for preparing consolidated financial statements

after the financial statements of the parent and subsidiary companies are unified in accounting caliber, the consolidated financial statements can be prepared. When preparing consolidated financial statements, the items in the financial statements are simply added up, then offset entries are made to offset internal transactions, and finally the consolidated amount of each item in the consolidated financial statements is obtained. The purpose of offset is to eliminate the influence of intra-group transactions on individual financial statements on the working papers of consolidated financial reports, so that there is no trace of intra-group transactions (hereinafter referred to as internal transactions) in the prepared consolidated financial reports. The reasons for the offset procedure are as follows: first, the group does not have its own account book system, and the preparation of consolidated financial reports is not based on direct account books like the preparation of individual financial statements, and can only be based on individual financial statements; Second, the consolidated financial report can only reflect the transactions and their results between the group and members outside the group, but the available basic "raw materials" include the transactions and their results between members within the group; Third, the offset work is only carried out on the working papers for preparing the consolidated financial report, but not registered in the relevant account books. Therefore, the offset entries made each time only have an impact on the preparation of the consolidated financial report this time, and this impact cannot be extended to the preparation of the consolidated financial report in the future [33].

the whole process is completed by merging working papers. The basic format of the consolidated working papers is as follows (Table 3-1). :

table 3-1 consolidated balance sheet working paper

project parent company A subsidiary B subsidiary ... offset entry minority equity consolidation number

debit and credit

accounts receivable

other receivables

advance receipts

inventory

long-term investment

fixed. Assets

......

1) Preparation of offset items in consolidated balance sheet

The consolidated balance sheet is prepared by combining the amounts of assets, liabilities and owners' equity items on the basis of the individual balance sheets of the parent company and subsidiaries and offsetting the internal transaction items.

(1) Long-term investment project offset

The amount of equity capital investment projects of the parent company to the subsidiary company is offset by the share held by the parent company in the owner's equity of the subsidiary company. The consolidated price difference during offset is reflected separately in the long-term investment project as the item of "consolidated price difference" in the consolidated balance sheet (the credit balance is expressed as a negative number). For mutual investment between subsidiaries, the parent company shall, by referring to the above practices, offset the amount of equity capital investment projects with the corresponding amount in the relevant projects of the owner's equity of another subsidiary.

(2) Offset of creditor's rights and debts

Creditor's rights and debts between the parent company and its subsidiaries, including accounts receivable, accounts payable, advance receipts and prepayments, should be offset with each other when compiling. When preparing offset entries in the consolidated working paper, debit items such as payable and advance receipt, and credit items such as receivable and advance payment.

for the bonds held by the parent company, subsidiaries and subsidiaries, the parent company should also offset each other when preparing consolidated financial statements. When preparing offset entries in the consolidated working paper, debit the item "bonds payable" and credit the item "long-term investment" or "short-term investment".

the difference between internal bond investment and bonds payable in long-term investment should be treated as "consolidated spread". When the amount of bond investment in long-term investment is higher than the corresponding amount of bonds payable, when making offset entries, the item of "consolidated price difference" shall be debited and credited to the item of "long-term investment"; When the amount of internal bond investment in long-term investment is lower than the corresponding amount of bonds payable, when making offset entries, the item of "long-term investment" shall be debited and the item of "consolidated price difference" shall be credited.

after the accounts receivable and accounts payable between the parent company and its subsidiaries and subsidiaries offset each other, the amount of bad debt provision accrued from the offset accounts receivable should also be offset. In the consolidated balance sheet, the provision for bad debts shall be listed by the amount of accounts receivable after offset. In the consolidated working draft, when an offset entry is prepared to offset the bad debt provision accrued by the offset accounts receivable, the item of bad debt provision is debited and the item of management expense is credited.

for the amount of bad debt reserve offset by internal accounts receivable offset in the preparation of consolidated financial statements in previous financial periods, the item of "bad debt reserve" should be debited and the item of "profit distribution at the end of the year" should be credited in the preparation of offset entries in consolidated financial statements in this period. To offset the bad debt provision accrued due to the increase of internal accounts receivable in the current period, the item of "bad debt provision" shall be debited and the item of "management expense" shall be credited when making offset entries; Offset the bad debt provision written off due to the decrease of internal accounts receivable in this period. When preparing offset entries, debit the item of "management expenses" and credit the item of "bad debt provision".

(3) Inventory offset in internal sales

In inventory items, the unrealized internal sales profit generated by internal sales shall be offset and listed as the offset amount. For the offset entries, please refer to the relevant part in the consolidated income statement.

(4) In fixed assets and other related projects, the amount of unrealized sales profit generated by internal sales should be offset and listed as the offset amount. For the offset entries, please refer to the relevant part in the consolidated income statement.

(5) The amount of each item of subsidiary owner's equity that is not owned by the parent company shall be regarded as minority shareholders' equity, and it shall be listed separately as a total amount before the owners' equity items in the consolidated balance sheet.

(6) The amount of undistributed profits in owners' equity is listed according to the amount of undistributed profits at the end of the period in the consolidated profit distribution table.

2) preparation of consolidated income statement offset items

consolidated income statement is prepared by combining the amounts of various items on the basis of the income statements of the parent company and subsidiaries and offsetting the following items.

(1) offset of internal sales revenue.

when all the goods sold internally are sold externally, the amount of internal sales revenue shall be offset in the consolidated sales revenue item, and the amount of purchase cost incurred in purchasing the goods internally shall be offset in the consolidated sales cost item. When preparing offset entries in consolidated working papers, debit the item of "main business income" and credit the item of "main business cost".

when all the goods sold internally are not sold externally, the amount of internal sales revenue should be offset in the consolidated sales revenue item, the amount of unrealized internal sales profit included in the goods sold internally in the inventory item, and the cost amount of the goods sold internally in the consolidated sales cost item. When preparing offset entries in consolidated working papers, debit the item of "main business income" and credit the item of "inventory" (offset in consolidated balance sheet) and the item of "main business cost". Unrealized internal sales profit is determined according to the sales gross profit margin of the selling company multiplied by the amount of internal sales income, in which: sales gross profit margin = (sales income-sales cost)/sales income× 1%

In the case of partial sale of internal sales goods, the amount of realized internal sales and the amount of unrealized internal sales should be treated separately:

The unrealized internal sales profit included in the inventory in the previous financial period should be treated. Inventories formed by internal sales that offset unrealized internal sales profits in the previous financial period shall be treated as realized sales in the current period when the consolidated financial statements are prepared in the current period, and the unrealized internal sales profits contained therein shall be treated as realized profits in the current period when the consolidated financial statements are prepared in the current period. When preparing offset entries in the consolidated working papers, the item of "undistributed profit at the beginning of the year" shall be debited and credited to the item of "main business cost" according to the amount of unrealized internal sales profit offset in the inventory of consolidated financial statements prepared in the previous period; The inventory carried forward from the previous period shall be treated as the inventory purchased in the current period, so as to offset the internal sales revenue, internal sales cost and unrealized internal sales profit respectively according to the above situation.

(2) Offset of unrealized internal sales profits generated by internal fixed assets transactions.

the fixed assets transactions between the parent company and its subsidiaries and subsidiaries refer to the activities of purchasing and selling fixed assets between the parent company and its subsidiaries, in which one party sells its own products and the other party buys the other party's products for use as fixed assets.

for the fixed assets without depreciation, the unrealized internal sales profit included is offset as follows: offset the internal sales income with the unrealized internal sales profit included in the internal sales cost and the original price of the fixed assets, that is, offset the sales income of the product in the consolidated sales income item; The amount to offset the sales cost of the product in the consolidated sales cost item; The amount of unrealized internal sales profit is offset in the original price of consolidated fixed assets. When preparing offset entries, debit "operating income" and credit "operating cost" and "original price of fixed assets". During the use period of the fixed assets, the unrealized internal sales profit contained in the original price of the fixed assets must be offset when preparing the consolidated financial statements for each period until the fixed assets quit the enterprise group. When preparing offset entries in the consolidated working papers, the item of "undistributed profit at the beginning of the year" shall be debited and the item of "original price of fixed assets" shall be credited, the amount of which is the amount of unrealized internal sales profit offset from the original value of the fixed assets in the previous financial period.

for fixed assets with depreciation, the offset of unrealized internal sales profit is as follows: during the financial period when the fixed assets transaction occurs, the following offset treatment should be carried out: in the current period when the fixed assets transaction occurs, the internal sales revenue should be offset against the unrealized internal sales profit included in the internal sales cost and the original price of the fixed assets, that is, the amount of sales revenue of the fixed assets transaction should be offset in the consolidated sales revenue item; The amount to offset the sales cost of the fixed asset transaction in the consolidated sales cost item; Offset the unrealized internal sales profit in the original price of the fixed assets in the original price of the consolidated fixed assets. When preparing offset entries, debit "operating income" and credit "operating cost" and "original price of fixed assets". When the depreciation is accrued, the unrealized internal sales profit included in the depreciation of the fixed assets shall also be offset. The offset amount is the difference between the depreciation amount accrued in the current period of the fixed asset and the depreciation amount accrued according to the original price of the fixed asset excluding unrealized internal sales profit. When the straight-line method is adopted, that is, the total unrealized internal sales profit included in the original price of the fixed asset is divided by the service period of the fixed asset. When preparing offset entries in consolidated working papers, debit the "accumulated depreciation" item and credit the "management expenses" and other items.

from the financial period after the transaction of the fixed assets to the liquidation and scrapping of the fixed assets, the following offsets shall be made: the unrealized internal sales profit included in the internal sales of the fixed assets shall be offset. When preparing offset entries in consolidated working papers, debit the item "undistributed profit at the beginning of the year"