Page 61 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes (6) For the discount or premium to the debenture-holders or preference shareholders: At the
time of amalgamation, absorption and external reconstruction shares may be repaid at
premium or discount. Such a premium or discount is first transferred to the realisation
account. Entries would be-
(a) For discount-
Debenture-holders Account Dr.
Preference Shareholders Account Dr.
To Realisation A/c

(Being transfer of discount to realisation A/c)
(b) For Premium
Realisation Account Dr.
To Debenture-holders A/c
To Preference Shareholders A/c

(Being transfer of premium to realisation A/c)
(7) For gain or loss on the payment of liabilities not taken over – If there are some liabilities
which are not taken over by the transferee company, those will not be transferred to the
realisation account. But if any profit or loss may occur on the redemption of such liabilities,
such a profit or loss will be transferred to the realisation account. Then, journal entries
would be–
(a) If there is loss:
Realisation A/c Dr.
To Relative liability A/c
(Being transfer of loss on repayment of the liability)

(b) If there is a profit:
Relative Liability A/c Dr.
To Realisation A/c
(Being transfer of profit on repayment of liability)

(8) For receiving the purchase consideration from transferee company-
Bank A/c Dr.
Shares in Transferee Company A/c Dr.
Debentures in Transferee Company A/c Dr.
To Transferee Company’s A/c

(Being receipt of purchase consideration in cash, shares and debentures)
(9) For closing the realisation A/c
(a) On closing the Realisation A/c if there is profit–
Realisation A/c Dr.

To Equity shareholders’ A/c
(Being transfer of profit on realisation A/c to the equity shareholder’s A/c)

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