Page 39 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes Accumulated Profits: That portion of profits which is not distributed to the shareholders for more
than one year is known as accumulated profits.
Amalgamation: It means an amalgamation pursuant to the provisions of the Companies Act,
1956 or any other statute which may be applicable to companies.
Business and All Assets: Here, the business means the vendor company’s business, which
includes all assets and all liabilities.
Dividend Equalisation Fund: It is created to maintain the rate of dividend of the company during
a period of crises.
General Reserve: General Reserve is created to strengthen the financial position of the company,
Insurance Fund: It is created to avoid payment of premium to an outside insurance company.
Liabilities: Liabilities mean all those liabilities which are payable to third parties (except company
and shareholders).
Trade Liabilities: Trade liabilities are those liabilities, which are incurred due to the purchase of
goods of the business. These include the trade creditors and bills payable.

2.6 review Questions

1. What do you mean by amalgamation? Explain its objectives.
2. What are the differences between amalgamation and absorption?
3. Explain different types of amalgamation.
4. How is purchase consideration determined? Explain.
5. What are the merits and demerits of amalgamation?

6. Write short notes on the following:
(a) Accumulated Losses.
(b) Insurance Fund.
(c) Pooling of Internal method.

(d) Provisions.
(e) Accident Funds.
7. How will you deal with accumulated losses?
8. What are the objectives of amalgamation and absorption?
9. Define the term amalgamation of companies in terms of Halsburry’s Laws of England.

answers: self assessment

1. True

2. True
3. False
4. False
5. False

6. Pooling

34 lovely professional university