1. Amalgamation, Absorption And Reconstruction F. Y. B. Com Prof
Amalgamation, Absorption And Reconstruction F.Y.B.Com Prof. Bhagwat A. B. s. m. joshi college, hadapsar, pune-28
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2. RECONSTRUCTION OF COMPANIES: It is of two types:-
AMALGAMATION: When two or more companies go into liquidation and one new company is formed it is called amalgamation.
ABSORPTION: When weaker company is taken over by another existing stronger company it is called absorption.
RECONSTRUCTION OF COMPANIES: It is of two types:-
External reconstruction:
Internal reconstruction
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3. Methods of calculating purchase consideration: Direct method.
PURCHASE CONSIDERATION: It is the amount payable by purchasing company to the purchased company for taking over the assets and liabilities of that company.
Methods of calculating purchase consideration:
Direct method.
Net assets method
Net payment method
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4. 2. Transfer only those liabilities taken to realization A/C.
Accounting Entries: Closing journal entries in the books of the company.
1. Transfer all the assets to realization A/C at their book value except cash/ bank if not taken over by the company.
2. Transfer only those liabilities taken to realization A/C.
3. Credit the realization A/C with the amount of purchase consideration.
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5. 4. If there are any realization expenses paid by the company. 5
4. If there are any realization expenses paid by the company. 5. Transfer Equity share capital, P& L A/C, General R- A/C, R-Fund to equity share holders A/C 6. For sale of assets for cash. 7. When liabilities are paid which are not taken over by the company. 8. Now close the realization A/C and find out profit or loss.
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6. 9. Further, pass the entry for receiving purchasing consideration. 10
9. Further, pass the entry for receiving purchasing consideration. 10. Finally, Equity shares from the company and remaining cash will be transferred to equity share holders.
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7. Opening entries in the books of new company.
On the date of agreement when purchase consideration is agreed upon.
For incorporation of assets and liabilities.
When amount of purchase consideration is actually paid.
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8. F.Y.B.Com
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