Amalgamation amalgamation is a process of unification. Absorption of companies involves combination of companies, whereas external reconstruction does not involve any combination. 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. 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. Section i amalgamation and external reconstruction introduction 2 1a. You might like meaning and concept of business combination advantages and disadvantages of business combination. Corporate accounting pdf notes academy of accounts. There may be amalgamation either transfer of two or more undertakings to an existing company or new company. Mcq on amalgamation and external reconstruction revised 2020 facebook.
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. Mcq on amalgamation and external reconstruction free bcom. There are no book in india i have seen where difference among the amalgamation, absorption, external reconstruction,marger has been cleared. Accounting for amalgamation of companies slideshare. Basic understanding about absorption, amalgamation and external reconstruction. External and internal reconstructions amalgamation of. Merger, amalgamation, acquisition, take over ppt download. It is the conversion of two companies and two balance sheets into one company and one combined balance sheet.
Financial, stamp duty and taxation aspects of amalgamation 6. Amalgamation, absorption and external reconstruction 7. In this article we will discuss about the top eight accounting problems on amalgamation and external reconstruction with their relevant solutions. Numerical on accounting treatment of amalgamation, absorption, internal and external reconstruction.
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. Unit i amalgamation absorption and external reconstruction amalgamation when two or more existing companies combine toge. The accounting procedure in case of external reconstruction is the same as in case of amalgamation or absorption in the nature of purchase. Amalgamation of companies preamble t he term amalgam means to unite, to come together as one, or to blend, and, from this. Difference between amalgamation and absorption with. Reconstruction and amalgamation legal news law news. Amalgamation is a process in which two companies liquidate to create a new company, which takes over the business of the liquidating companies. The following are the summarised balance sheets of v ltd and p ltd as at 31st march, 2012. In external reconstruction a new company is formed for the purpose of. The process of two or more companies combining to form a new company is called absorption. Amalgamantion and external reconstruction consolidation. Reconstruction refers to certain arrangements made by financially unsound companies. Accounting for amalgamations and corporate restructuring 1 z 1 accounting for amalgamations and corporate restructuring topic 1.
Concept and types of reconstruction accountingmanagement. However, one should remember that amalgamation as its name suggests, is nothing but two companies becoming one. Differences between absorption and external reconstruction 1. Understanding inter company holdings and numerical on. Amalgamation absorption and reconstruction of companies module 5.
Is formed to take over the business of two existing companies, x ltd. Meaning of external reconstruction differences between. Amalgamantion and external reconstruction free download as pdf file. Understand selection from corporate accounting book. The format of the detailed balance sheet of a company in a horizontal form is given below. Absorption and external reconstruction but a days simply called as amalgamation. The following information has been extracted from the balance sheets of p ltd. This chapter is called before 2002 as combined combination of three words amalgamation, absorption and external reconstruction but a days simply called as amalgamation. In this case, a newly formed company takes over the business of an existing company. In external reconstruction, one company is liquidated and another new company is formed. Amalgamation and external reconstruction multiple choice. These bills are supported by documents such as bill of lading, insurance policy etc. Amalgamation module vi amalgamation absorption and.
Amalgamation of companies results in combination of companies, but external reconstruction does not result in any such combination. Amalgamation of banking and government companies 8. In this article we will discuss about the top five problems on amalgamation and external reconstruction with their relevant solutions. What are the differences between amalgamation, absorption. Know the various meanings of the terms amalgamation, absorption and external reconstruction. Amalgamation term amalgamation is used when two or more existing companies into liquidation and new co. Student will be able to download the pdf file within 60 days of subscription. Amalgamation of companies involves liquidation of two or more companies, while external reconstruction involves liquidation of only one company, 2. 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. In this case an existing company takes over the business of one or more existing companies. Explained the concept and difference between amalgamation absorption and external reconstruction. Amalgamation, absorption and external reconstruction. Student will be able to download pdf notes related to the course after subscribing to this course. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads.
From the point of view of an accountant, external reconstruction is similar to amalgamation in the nature of purchase. Amalgamation absorption and reconstruction of companies module 5 amalgamation term amalgamation is used when two or more existing companies into. Indian logic reasoning ugcnet paper1 mcq download pdf diwakar rajput. External reconstruction refers to closingliquidating the company and starting again a new or a fresh. Problems on amalgamation, absorption and external reconstruction amalgamation problem no. 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. Amalgamation and external reconstruction multiple choice questions.
In amalgamation, one company merges with another company and forms a new company. The accounting procedure of internal reconstruction is distinct from that of amalgamation, absorption and external reconstruction. Problems on amalgamation and external reconstruction. In this unit, we will discuss few important terms related to acquisition of business. It is similar to amalgamation though not exactly the same. The reconstruction arrangement made by a company, to come out of its financial difficulties, may be external or internal. The company that acquires the business is called the purchaser company and the. Neither reconstruction nor amalgamation has a precise legal meaning. Mcq on amalgamation and external reconstruction revised 2020.
This document is highly rated by b com students and has been viewed 2800 times. The company that acquires the business is called the purchaser company and the seller of the business is called the vendor. Here is the video about purchase consideration under amalgamation, absorption and external reconstruction, in that we have seen calculation. 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. In amalgamation, the identity of both the companies exist and survive. Further discussed the procedure and concept to calculation of purchase consideration. It is the process in which one existing company takes over the other existing company and merges together as a single unit. Redemption of preference shares and buy back of equity shares 9. It is the pooling of assets and liabilities and interest of two companies. When the transferee company decides to compensate the transferor company on the basis of fair. 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, absorption and reconstruction accounting.
Amalgamation and external reconstruction 8 accounting. It includes absorption of one company by the other company. The upcoming discussion will update you about the difference between external reconstruction and amalgamation. Here is a compilation of top five accounting problems on amalgamation, absorption and reconstruction with its relevant solutions. On the other hand, absorption is the process in which the one powerful company takes control over the weaker company. Amalgamation absorption and reconstruction of companies.
Presentation mode open print download current view. Advanced managerial accounts 1 multiple choice questions chapter. Basis amalgamation absorption external reconstruction meaning two or more companies are wound up and a new company is formed to take over their business. Difference between internal and external reconstruction. Amalgamation involving intercompany shareholding as14 is silent on this point 20. External reconstruction refers to closingliquidating. The transferor companies lose their identity to form a new company transferee company.
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