investment allowance resrve

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mahesh

mahesh (Querist)
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21 September 2010 what is investment allowance reserve, what is its treatment for accounting entries..

CA Sanat Pyne

CA Sanat Pyne (Expert)
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21 September 2010 investment allowance reserve is a tax concept u/s 32 of income tax act which has been omitted from the act since 2001-02.Such reserve is required to be made for 8 years otherwise exemption provided earlier under under income tax act shall be revoked.

in accounts it is like a ordinary reserve

in case of amalgamation entry is made as follows as per AS-11

So at the time of amalgamation a symbol entry is made in the books of purchasing company

Statutory reserve a/c dr.
To investment allowance reserve

And after completion of specified period it is reserved

In the books of selling company(amalgamating co.) it is treated as profit and loss accounts

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