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Unit 1: Acquisition of Business
           Ashwani Panesar, Lovely Professional University



                            unit 1: acquisition of Business                                     notes


             contents

             Objectives
             Introduction
             1.1   Some Important Terms Relating to Acquisition of Business
             1.2   Accounting Treatment
                 1.2.1  Accounting Treatment: In the Books of Vendor
                 1.2.2  Accounting Treatment: In the Books of Purchasing Company

             1.3   Summary
             1.4   Keywords
             1.5   Review Questions
             1.6   Further Readings

          objectives


          After studying this unit, you will be able to:
          l z  Define the term acquisition of business
          l z  Discuss some important terms related to acquisition of business

          l z  Explain the accounting treatment for acquisition of business
          l z  Solve some numerical problems related to purchase of business

          introduction

          Acquisition or purchase of business by an incorporated company means the purchase of or taking
          over the existing business of a non-corporate body as sole proprietorship or partnership firm. An
          existing business of a sole trader or partnership firm can be acquired by an existing corporate
          company or by a newly formed company. When a corporate business is purchased by another
          corporate body it is related to the subject matter of amalgamation, absorption and reconstruction
          of companies. The company that acquires the business is called the purchaser company and the
          seller of the business is called the vendor.
          In this unit, we will discuss few important terms related to acquisition of business. Then, we
          will  focus  on  accounting  treatment  of  the  business  which  will  be  further  elaborated  by  few
          illustrations.

          1.1  some important terms relating to acquisition of Business

          Acquisition of business by a limited company generally refers to the purchase of a non-corporate
          business like sole-proprietorship or partnership form of business by a company. This does not
          necessarily mean that a limited company cannot acquire the business of a corporate body i.e.,
          another limited company. But strictly speaking, the acquisition of business of a limited company
          by  another  limited  company  comes  under  the  purview  of  amalgamation  absorption  and
          reconstruction of companies.






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