Accounting treatment for amalgamation under AS - 14

Accounting standard 14 provides the guidelines for accounting treatments of amalgamation or mergers. If we see corporate sector, every big company is purchasing other his competitors because of many benefits of monopoly. One of example of Google Inc.
which is USA company and it purchased you tube, feed burner and also interested to buy other companies. In India, Satyam is purchased by tech mahindra. So, it is general word which is famous in corporate sector.

Definition of Amalgamation

( I ) As a merge of two companies into one new companies
Suppose A Co. and B co. merge into a new company C . This is amalgamation .
( II ) If one company is purchased by other company this is also amalgamation .

Suppose A company is purchased by B co. , then this is called A is amalgamated into B Co.

Its definition is under the pursuant of the provisions of Indian Company act 1956 and all rules and regulation of Indian company act will apply on accounting treatment of amalgamation.

System of Accounting in Amalgamation

If you understand the system of accounting in amalgamation, it is so interesting and high professional accountant can treat on correct accounting treatment of amalgamation.

i) Amalgamation by Pooling of Interest or amalgamation as merge

Under this system there are following rules and regulations will apply.

(A) All the assets and liabilities of Transferor Company will become the assets and liabilities of Transferee Company.
(B) All the shareholders of Transferor Company will become the shareholders of Transferee Company.

ii ) Amalgamation by purchase consideration

When a company purchases other company at this time company will pay purchase consideration to its shareholder under following method.

a) Fixed and lump sum amount is given by purchasing company to amalgamating company

Suppose A company is amalgamate into B co. and under agreement B Co. will pay $ 5000000. This is purchase consideration under lump sum method.

b) Net word method

Under this method a company who purchase other company calculates the net word of company and on the basis of net worth, purchase price is determined.

Calculation of purchase price =

Total assets purchased by co. Under agreed value - total liabilities taken by company

Suppose A company purchases B co. and it taken the All assets at $ 100000 and also take its liabilities at $ 20000, then purchase price of company is

= $ 100000 - $ 20000

Company can pay this purchase price in cash, bank or by issuing new shares or debenture by agreement between both companies.

Journal entries of amalgamation related even is as same as dissolution of firm in vendor company .

1. When all assets purchased by other company , all assets will transfer to realization account

Realisation account debit

Assets Account Credit

2. When all liabilities taken by purchasing company , all liabilities will transfer to realization account

Liabilities account debit

Realisation account Credit

3. When purchase price is determined

Purchase company account debit

Realisation account credit

4. when vendor company receives the purchase price

Bank Account debit
Shares in purchasing company account debit
Debenture in purchasing company account debit
purchasing company accounting credit

6. Profit on sale of assets which is not taken over by purchasing company

Bank account debit ( Getting the money from sale of assets )
To assets account ( Book value
To realization account ( Profit )

7. Treatment of liabilities which is not taken by purchasing company

Liabilities account debit

Realisation account debit ( If paid excess to creditors )

Bank account credit

Realisation account credit ( If paid less to creditors )

8. When liquidation expenses paid by vendor company

Realisation account debit

Bank account credit

Closing of realization account

9. If profit on realization account

Realisation account debit

Shareholder account credit

10. If loss

Shareholder account debit

Realization account credit



access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
Accounting Education: Accounting treatment for amalgamation under AS - 14
Accounting treatment for amalgamation under AS - 14
Accounting Education
Not found any posts VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES POSTS View All RECOMMENDED FOR YOU LABEL ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock