Non-controlling Interests

When a company owns, say, 60 percent of a subsidiary and consolidates all of it, the 40 percent of the subsidiary's net assets and profit that belongs to outside shareholders is shown as Non-controlling Interests, inside equity but apart from the parent's own funds. The figure is built on the consolidation worksheet: the outsiders' share of the subsidiary's equity at acquisition plus their share of profits since, less dividends paid to them. It is posted once a year by Journal Entry in the consolidated books, and a standalone company never uses it. Showing the outsiders' share in Retained Earnings would overstate what belongs to the parent's shareholders.

Non-controlling Interests = Outsiders' percentage x Subsidiary net assets (share at acquisition + share of later profit - dividends paid to them)

1. 01Prepare the consolidation worksheet with the subsidiary's audited net assets and the outsiders' percentage.
2. 02Go to Invoicing > Journal Entry > New in the consolidated company dated the year end.
3. 03Debit Retained Earnings and credit Non-controlling Interests for the outsiders' share of the year's profit.
4. 04Submit. The entry below posts.
5. 05Reduce the balance by Journal Entry when dividends are paid to the outside shareholders.
6. 06Show the figure as a separate line within Equity on the consolidated Balance Sheet.

Post by Journal Entry when preparing group consolidated statements. A standalone company never uses it.

Dr Retained Earnings Rs 1,00,000, Cr Non-controlling Interests Rs 1,00,000 for the 40 percent of subsidiary profit owned by outsiders.