Is formed to take over the business of two existing companies, x ltd. Amalgamation of banking and government companies 8. May 03, 2020 introduction to amalgamation amalgamation of companies, advanced corporate accounting b com notes edurev is made by best teachers of b com. Merger, amalgamation, acquisition, take over ppt download. Key differences between internal and external reconstruction.
Reconstruction and amalgamation legal services india. Student will be able to download pdf notes related to the course after subscribing to this course. Advanced managerial accounts 1 multiple choice questions chapter. Difference between internal and external reconstruction. In this case an existing company takes over the business of one or more existing companies. Basis amalgamation absorption external reconstruction meaning two or more companies are wound up and a new company is formed to take over their business. Amalgamation and external reconstruction cma tutors. Internal reconstruction can be defined as the reorganization of the company, without liquidating the existing company and forming a new one. From the point of view of an accountant, external reconstruction is similar to amalgamation in the nature of purchase. Introduction to amalgamation amalgamation of companies. Amalgamation is a broad term which includes mergers uniting of two existing companies and. A new company x is formed to take over the business of an existing company y which is wound up.
It is also termed as reorganization which permits the existing company to be continued. Amalgamation means the liquidation of one or more companies and transfer of business of liquidated entities to another entity. Amalgamation and external reconstruction 8 accounting. This document is highly rated by b com students and has been viewed 2914 times.
The primary difference between amalgamation and absorption of companies is that in amalgamation, the two companies are liquidated to form a new company, but in absorption only the merged company goes into liquidation, but there is no formation of a new company. Amalgamation absorption and reconstruction of companies module 5. Here is a compilation of top five accounting problems on amalgamation, absorption and reconstruction with its relevant solutions. Numerical on accounting treatment of amalgamation, absorption, internal and external reconstruction. In amalgamation, one company merges with another company and forms a new company. Unit iv amalgamation of companies for corporate accounting.
However, one should remember that amalgamation as its name suggests, is nothing but two companies becoming one. Such external reconstruction is essentially covered under the category amalgamation in the nature of merger in as accounting standard 14, accounting for amalgamations. Amalgamation free download as powerpoint presentation. Balance sheet as on 31st march 2014 liabilities anita ltd. Amalgamation of companies results in combination of companies, but external reconstruction does not result in any such combination.
In this case, a newly formed company takes over the business of an existing company. Amalgamation is defined as the combination of one or more companies into a new entity. Understand selection from corporate accounting book. What are the differences between amalgamation, absorption. Amalgamation module vi amalgamation absorption and. 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 of companies involves liquidation of two or more companies, while external reconstruction involves liquidation of only one company, 2. Amalgamation of companies by cacma santosh kumardownload. Amalgamation, absorption and external reconstruction.
Amalgamation is defined as a simple arrangement or reconstruction of business. The following are the summarised balance sheets of v ltd and p ltd as at 31st march, 2012. In spite of much similarity in amalgamation an absorption, the main differences of. Two or more companies join to form a new company absorption or blending of one by the other thereby, amalgamation includes absorption. Amalgamation and external reconstruction multiple choice questions. Amalgamation, absorption and internal and external reconstruction. The following information has been extracted from the balance sheets of p ltd. Explained the concept and difference between amalgamation absorption and external reconstruction. Differences between amalgamation and external reconstruction. Concept and types of reconstruction when a company is suffering loss for several past years and suffering from financial difficulties, it may go for reconstruction. The outcome of this arrangement is that the amalgamating firm is. Problems on amalgamation, absorption and external reconstruction.
Financial, stamp duty and taxation aspects of amalgamation 6. Accounting for amalgamation, absorption and external reconstruction 1. Unit i amalgamation absorption and external reconstruction amalgamation when two or more existing companies combine toge. Basis amalgamation absorption external reconstruction meaning. Generally, share capital is reduced to write off the past accumulated losses of the company. 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. Meaning of external reconstruction differences between. Problems on amalgamation, absorption and external reconstruction amalgamation problem no.
It is a process that involves combining of two or more companies as either absorption or as blend. However, one should remember that amalgamation as its name suggests. Amalgamation involving intercompany shareholding as14 is silent on this point 20. Know the various meanings of the terms amalgamation, absorption and external reconstruction. Legal provisions relating to amalgamation in india introduction an entrepreneur may grow its business either by internal expansion or by external expansion. Accounting for amalgamations the accounting issues pertaining to amalgamation as defined under the provision of the companies act1956 are dealt under accounting standard as 14 as evolved by the institute of charted accountant of india. Basic understanding about absorption, amalgamation and external reconstruction. Amalgamation term amalgamation is used when two or more existing companies into liquidation and new co. Concept and types of reconstruction accountingmanagement. Understanding inter company holdings and numerical on the intercompany holdings.
Accounting for amalgamation partii amalgamation means the liquidation of one or more companies and transfer of business of liquidated entities to another entity. In this article we will discuss about the top five problems on amalgamation and external reconstruction with their relevant solutions. Mcq on amalgamation and external reconstruction revised 2020. In the part 1 click here for part i accounting for amalgamation we learnt about nature of amalgamation and. Accounting for amalgamation, absorption and external. Further discussed the procedure and concept to calculation of purchase consideration. Chapteriii legal provisions relating to amalgamation in india. It is the conversion of two companies and two balance sheets into one company and one combined balance sheet.
Amalgamation means the merging of two or more than two companies for eliminating competition among them or for growing in size to achieve the economies of scale. The following points are relevant on account of the differences between internal and external reconstruction. There are no book in india i have seen where difference among the amalgamation,absorption,external reconstruction,marger has been cleared. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads. Accounting for external reconstruction the accounting procedure in case of external reconstruction is the same as in case of amalgamation or absorption in the nature of purchase. External and internal reconstructions amalgamation of. The accounting procedure of internal reconstruction is distinct from that of amalgamation, absorption and external reconstruction. The upcoming discussion will update you about the difference between external reconstruction and amalgamation. In amalgamation, the identity of both the companies exist and survive. Differences between absorption and external reconstruction 1. Amalgamation, absorption and reconstruction of companies determining purchase consideration.
In the case of internal expansion, a firm grows gradually over time in the normal case of the business, through. Amalgamation and external reconstruction multiple choice. Amalgamation absorption and reconstruction of companies. There may be amalgamation either transfer of two or more undertakings to an existing company or new company. Section i amalgamation and external reconstruction introduction 2 1a. Absorption of companies involves combination of companies, whereas external reconstruction does not involve any combination. Absorption of companies does not involve formation of a new company, however, external reconstruction involves formation of a new company, 2. The above two companies amalgamated on the date of the balance and a new company. In this article we will discuss about the top eight accounting problems on amalgamation and external reconstruction with their relevant solutions. Amalgamation amalgamation is a process of unification. Accounting for companiesii lpu distance education lpude. Mcq on amalgamation and external reconstruction revised 2020 facebook.
Chapter1 accounts of amalgamation of companies jhbwc. This document is highly rated by b com students and has been viewed 4633 times. It is similar to amalgamation though not exactly the same. The process of two or more companies combining to form a new company is called absorption. 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. Problems on amalgamation and external reconstruction. Difference between amalgamation and absorption with. When the transferee company decides to compensate the transferor company on the basis of fair values of the assets and. Amalgamation, absorption and reconstruction accounting.
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