Page 65 - DCOM205_ACCOUNTING_FOR_COMPANIES_II

Accounting for Companies – II

notes To Various Reserves A/c
To Business Purchase A/c

(Being sundry assets, liabilities and reserves of Transferor Company taken over)

Notes
(a) All the assets and liabilities will be shown individually at the book value.
(b) The difference between debit and credit an account of purchase consideration will
be adjusted in the General Reserve of the transferee company. If the credit side is
greater than the debit side, the following entry will be passed.
Various Assets A/c Dr.
General Reserve (Balancing figure) A/c Dr.
To Various Liabilities A/c
To Reserve & Funds A/c
To Business Purchase A/c

(3) For making the payment of purchase consideration to the liquidation of transferor
company-
Liquidator of Transferor Company A/c Dr.
To Bank A/c
To Debentures A/c
To Equity Share Capital A/c
To Preference Share Capital A/c
(Being discharge of purchase consideration in cash, debentures and shares)
If shares or debentures are issued on discount, discount account will also be debited and
if shares or debentures are issued at premium, premium account will be credited in the
above entry.
(4) For the payment of liquidation expenses of transferor company-
Goodwill/Liquidation Expenses A/c Dr.
To Bank A/c

(Being payment of liquidation expenses)
(5) For the payment of preliminary/formation expenses of the transferee company-
Preliminary Expenses A/c Dr.
To Bank A/c
(Being payment of preliminary expenses)
(6) For discharging the debentures of the transferor company-
Debentures of the Transferor Company A/c Dr.
To Bank A/c
To Debentures of the Transferor Company
To Shares of the Transferor Company.

(Being discharges of debentures of the transferor company)

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