Accounting for amalgamation of companies slideshare. Amalgamation, absorption and reconstruction accounting. Amalgamation, absorption and external reconstruction 7. Amalgamation, as the name itself suggest, is a form of external reconstruction, in which there is a combination of two or more than two companies, either by merger or by takeover. Amalgamation and external reconstruction multiple choice. Apr 09, 2020 external and internal reconstructions amalgamation of companies, advanced corporate accounting b com notes edurev is made by best teachers of b com. Amalgamation amalgamation is a process of unification. Problems on amalgamation, absorption and external reconstruction amalgamation problem no. Corporate accounting pdf notes academy of accounts. Redemption of preference shares and buy back of equity shares 9. Reconstruction and amalgamation legal news law news. Further discussed the procedure and concept to calculation of purchase consideration. It is the pooling of assets and liabilities and interest of two companies.
Student will be able to download the pdf file within 60 days of subscription. Difference between internal and external reconstruction last updated on june 8, 2017 by surbhi s reconstruction is a process of the companys reorganization, concerning legal, operational, ownership and other structures, by revaluing assets and reassessing the liabilities. Mcq on amalgamation and external reconstruction free bcom. Here is a compilation of top five accounting problems on amalgamation, absorption and reconstruction with its relevant solutions. Amalgamation absorption and reconstruction of companies module 5. The transferor companies lose their identity to form a new company transferee company. In this article we will discuss about the top five problems on amalgamation and external reconstruction with their relevant solutions. Amalgamation of companies involves liquidation of two or more companies, while external reconstruction involves liquidation of only one company, 2. In this case, a newly formed company takes over the business of an existing company. The process of two or more companies combining to form a new company is called absorption.
In amalgamation, the identity of both the companies exist and survive. Difference between internal and external reconstruction. Amalgamation, absorption and external reconstruction. Presentation mode open print download current view. The format of the detailed balance sheet of a company in a horizontal form is given below. Basis amalgamation absorption external reconstruction meaning two or more companies are wound up and a new company is formed to take over their business. Amalgamantion and external reconstruction free download as pdf file. In external reconstruction, one company is liquidated and another new company is formed. From the point of view of an accountant, external reconstruction is similar to amalgamation in the nature of purchase. In this case an existing company takes over the business of one or more existing companies. External and internal reconstructions amalgamation of. When two or more companies carrying on similar business decide to combine, a new company is formed, it is known as a amalgamation b absorption c internal reconstruction d external reconstruction 2.
The following information has been extracted from the balance sheets of p ltd. When the transferee company decides to compensate the transferor company on the basis of fair. These bills are supported by documents such as bill of lading, insurance policy etc. This document is highly rated by b com students and has been viewed 2800 times. It is the conversion of two companies and two balance sheets into one company and one combined balance sheet. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads. Where an undertaking is being carried on by a company and is in substance transferred, not to an outsider, but to another company consisting substantially of the same shareholders with a view to its being continued by the transferee company, there is a reconstruction. Know the various meanings of the terms amalgamation, absorption and external reconstruction. Amalgamation absorption and reconstruction of companies. In this unit, we will discuss few important terms related to acquisition of business. Differences between absorption and external reconstruction 1. In external reconstruction a new company is formed for the purpose of. Amalgamation is a process in which two companies liquidate to create a new company, which takes over the business of the liquidating companies.
Numerical on accounting treatment of amalgamation, absorption, internal and external reconstruction. External reconstruction refers to closingliquidating. The company that acquires the business is called the purchaser company and the seller of the business is called the vendor. Amalgamation of banking and government companies 8.
External reconstruction takes place when an existing company goes into liquidation for the express purpose of selling its assets and liabilities to a newly formed company which is generally owned and named alike. It is the process in which one existing company takes over the other existing company and merges together as a single unit. Reconstruction refers to certain arrangements made by financially unsound companies. Advanced managerial accounts 1 multiple choice questions chapter. Basic understanding about absorption, amalgamation and external reconstruction.
It is similar to amalgamation though not exactly the same. Amalgamation and external reconstruction 8 accounting. On the other hand, absorption is the process in which the one powerful company takes control over the weaker company. However, one should remember that amalgamation as its name suggests, is nothing but two companies becoming one. There may be amalgamation either transfer of two or more undertakings to an existing company or new company. The company that acquires the business is called the purchaser company and the. You might like meaning and concept of business combination advantages and disadvantages of business combination. This chapter is called before 2002 as combined combination of three words amalgamation, absorption and external reconstruction but a days simply called as amalgamation. Is formed to take over the business of two existing companies, x ltd.
Mcq on amalgamation and external reconstruction revised 2020. Amalgamation absorption and reconstruction of companies module 5 amalgamation term amalgamation is used when two or more existing companies into. External reconstruction refers to closingliquidating the company and starting again a new or a fresh. In amalgamation, one company merges with another company and forms a new company. Section i amalgamation and external reconstruction introduction 2 1a. Amalgamation involving intercompany shareholding as14 is silent on this point 20. The accounting procedure in case of external reconstruction is the same as in case of amalgamation or absorption in the nature of purchase. Meaning of external reconstruction differences between. Amalgamation term amalgamation is used when two or more existing companies into liquidation and new co.
Merger, amalgamation, acquisition, take over ppt download. Unit i amalgamation absorption and external reconstruction amalgamation when two or more existing companies combine toge. Here is the video about purchase consideration under amalgamation, absorption and external reconstruction, in that we have seen calculation. It includes absorption of one company by the other company.
Amalgamation of companies results in combination of companies, but external reconstruction does not result in any such combination. The following are the summarised balance sheets of v ltd and p ltd as at 31st march, 2012. Understand selection from corporate accounting book. The upcoming discussion will update you about the difference between external reconstruction and amalgamation. Amalgamantion and external reconstruction consolidation. Amalgamation module vi amalgamation absorption and. There are no book in india i have seen where difference among the amalgamation, absorption, external reconstruction,marger has been cleared. Absorption of companies involves combination of companies, whereas external reconstruction does not involve any combination. Mcq on amalgamation and external reconstruction revised 2020 facebook. Student will be able to download pdf notes related to the course after subscribing to this course. Reconstruction and amalgamation the company wished to avoid being wound up and negotiated a scheme in which the existing shareholdings in the company would be transferred to a new company which would take over the companys undertaking and assets as well as its debts. In the part 1 click here for part i accounting for amalgamation we learnt about nature of amalgamation and method of accounting, now we are going to learn journal entries in the event of amalgamation. The reconstruction arrangement made by a company, to come out of its financial difficulties, may be external or internal. In this article we will discuss about the top eight accounting problems on amalgamation and external reconstruction with their relevant solutions.
Problems on amalgamation and external reconstruction. Difference between amalgamation and absorption with. The accounting procedure of internal reconstruction is distinct from that of amalgamation, absorption and external reconstruction. What are the differences between amalgamation, absorption.
Internal reconstruction is a method of corporate restructuring where an arrangement is made by the company of the organization where in changes in the assets and liabilities are made to improve the financial position without liquidating the company or transferring the ownership to external party, whereas external reconstruction is the one where. Explained the concept and difference between amalgamation absorption and external reconstruction. Amalgamation of companies preamble t he term amalgam means to unite, to come together as one, or to blend, and, from this. Accounting for amalgamations and corporate restructuring 1 z 1 accounting for amalgamations and corporate restructuring topic 1. Neither reconstruction nor amalgamation has a precise legal meaning.
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