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investment allowance resrve

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mahesh

mahesh (Querist)

21 September 2010 what is investment allowance reserve, what is its treatment for accounting entries..

CA Sanat Pyne

CA Sanat Pyne (Expert)

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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