Page 60 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Unit 4: Amalgamation: Accounting Treatment

notes

Notes

(a) All liabilities will be shown individually.
(b) Accumulated profits are not transferred to Realisation A/c.
(c) If the transferee company agrees to pay some liabilities directly, such liabilities will
not be transferred to the realisations A/c.

(d) Those liabilities, which have not been taken by the transferee company, will also not
be transferred to the Realisation A/c.

(3) For recording the purchase consideration due-
Transferee Company A/c Dr.

To Realisation A/c
(Being purchase consideration receivable)
(4) For selling the assets which are not taken over by the transferee company:
Bank or Cash A/c Dr.
To Realisation A/c

(Being the realisation of assets)
(5) For liquidness expenses of the transferee company.
(a) When the payment of liquidation expenses or realisation expenses is made by the
transferor company itself.
Realisation A/c Dr.
To Bank A/c
(Being payment of liquidation expenses)
(b) If liquidation expenses are borne and paid by the transferee company, it would be
better not to pass any entry. Alternatively, the following two entries may be passed-
(i) When expenses are paid-
Transferee Company A/c Dr.
To Bank A/c

(Being payment of liquidation expenses on the behalf of Transferee Company)
(ii) When the expenses are reimbursed-
Bank A/c Dr.
To Transferee Company’s A/c

(c) If the transferee company pays the liquidation expenses with purchase consideration
and not pay separately-
Realisation A/c Dr.
To Bank A/c

(Being payment of Realisation Expenses)

lovely professional university 55