Teaching Consolidated Income Statements--a New Approach.

Abstract Accounting students, early in their careers learn to understand the relationship between the position statement and the income statement. In studying these consolidated financial statements, the student becomes overly involved in the details of elimination entries and worksheets with little real understanding of why the entries are being made. This article attempts to overcome some of these problems by using a slightly different approach to the teaching of the consolidated income statement. First, a change in the type of elimination entries normally made in consolidated income statements is introduced. Then elimination entries involving intercompany sales are simplified into four steps, each of which is explained very logically. It further illustrates some of the techniques found useful in teaching this new approach to elimination entries. These techniques involve the use of box diagrams and a modification in the work-sheet form. It follows that taking each statement separately minimizes the complications involved with elimination entries.