This course provides a clear and easy-to-understand explanation of the challenging topic of "Consolidated Accounting" in the Level 2 Nissei Bookkeeping Examination, using diagrams and journal entry examples.
This is the fourth installment in our Consolidated Accounting series, where we will learn about the elimination of unrealized profits included in inventory and non-depreciable fixed assets, as well as downstream and upstream accounting. ✨
We will also explain how to handle cases where unrealized profits for both beginning and ending inventory are presented simultaneously. 😊

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📝After the lecture, move on to problems involving consolidated financial statements.
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Those who have completed Consolidated Accounting ①-④ should try problems involving the creation of consolidated income statements and consolidated balance sheets.

▶Consolidated Financial Statements | Problems on Preparing Consolidated Income Statements and Consolidated Balance Sheets
【連結財務諸表】日商簿記２級（連結損益計算書・連結貸借対照表）〜図解でわかりやすく解説〜

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✅What you will learn from this video
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・Reasons for eliminating unrealized profits
・Calculation and journal entry of unrealized profits included in ending inventory
・Differences between downstream and upstream
・Adjustment of non-controlling interests in upstream
・Elimination of unrealized profits included in non-amortizable fixed assets
・Realization treatment of unrealized profits included in beginning inventory
・How to think when the treatment of beginning and ending inventory is given simultaneously
・How to determine whether the parent company or subsidiary made the sale

If goods sold between a parent company and a subsidiary remain within the corporate group at the end of the fiscal year, the profits included in those goods have not yet been realized externally.
Therefore, in consolidated financial statements, those profits are eliminated as unrealized profits.

✅ Downstream
This is a transaction where a parent company sells goods or fixed assets to a subsidiary.
Since the parent company's recorded profit is eliminated, there is no need to burden non-controlling shareholders with the impact of eliminating unrealized profits.

✅ Upstream
This is a transaction where a subsidiary sells goods or fixed assets to a parent company.
Since the subsidiary's recorded profit is eliminated, after eliminating unrealized profits, the impact on non-controlling interests must also be considered.

When solving the problem, organize the information in the following order:

① Confirm whether the sale was made by the parent company or the subsidiary.
↓ ② Determine whether it is downstream or upstream.
↓ ③ Calculate the unrealized profit included in ending inventory, etc.
↓ ④ Make an elimination entry for the unrealized profit.
↓ ⑤ If it is upstream, adjust the impact on non-controlling interests.

Drawing the flow of goods with arrows at the beginning makes it easier to distinguish between downstream and upstream. 😊
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✅Table of Contents
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0:07 What is the elimination of unrealized profit?
1:51 Ending Inventory | Downstream
4:44 Ending Inventory | Upstream
6:50 What is unrealized profit for non-depreciable fixed assets?
7:24 Non-depreciable fixed assets | Downstream
8:26 Non-depreciable fixed assets | Upstream
10:27 Beginning Inventory | Downstream
11:46 Beginning Inventory | Upstream
13:36 Beginning and Ending Inventory | Downstream
16:36 Beginning and Ending Inventory | Upstream
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✅Recommended Learning Order for Consolidated Accounting
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①Consolidated Accounting①
Consolidated Accounting on the Date of Acquisition of Control, Fully Owned/Partially Owned, Goodwill
【日商簿記２級】『商業簿記　第１６回』連結会計①（連結財務諸表/支配獲得日の連結会計...

②Consolidated Accounting②
Year 1 & 2 After the Date of Acquisition of Control, Timetable, Opening Journal Entries
【日商簿記２級】『商業簿記　第１７回』連結会計②（支配獲得日後１年目の連結/支配獲得...

③Consolidated Accounting③
Internal Transactions, Receivables/Payables, Adjustment of Allowance for Doubtful Accounts
【日商簿記２級】『商業簿記　第１８回』連結会計③（内部取引高の相殺/債権・債務の相殺...

④Consolidated Accounting④【Current Video】
Elimination of Unrealized Profits, Downstream, Upstream

▶Nissho Bookkeeping Level 2 Learning Commercial Bookkeeping in Order
【2026年度版】日商簿記2級 商業簿記講義｜知識ゼロから合格へ

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📘Next Commercial Bookkeeping Lecture
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Those who have finished the consolidated accounting practice problems should proceed to Lecture 20, "Head Office and Branch Accounting."
▶Commercial Bookkeeping Lecture 20 | Head Office and Branch Accounting
【日商簿記２級】『商業簿記　第２０回』本支店会計（本支店合併財務諸表/貸借対照表/損...

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✅Exam Preparation and Study Methods
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▶Nissho Bookkeeping Level 2 Exam Preparation | Questions 1-5
【2026年度版】日商簿記2級 本試験対策｜第1問〜第5問・解く順番と時間配分

▶【1-Month Passing Roadmap】Study Method to Pass the Nissho Bookkeeping Level 2 Exam Through Self-Study
【11分で解説】実体験！簿記２級に１ヶ月で合格する方法（転職にも役立つ資格）

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🌟Membership Information
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