Plz Make My concept Clear

hey after removing pc u have pass the

1. journal entries in the books of new co,(merger method or purchase method)

2. journal entries in the books of old co (realisation a/c wala)

3. finally prepare the b/s on the basis of journal entries of new co

better read from a refernce book and learn the concepts on your own

1. Though the concept of amalgamation, absorbtion and external reconstruction are different, the accounting treatment of the three are same.

2. The problem areas are:

  stage 1- calculation of purchase consideration.

  stage 2- ledger entries in the books of vendor company.

  stage 3- acquisition entries in the books of purchasing company.

3. stage 1- calculation of Purchase Consideration(PC)

methods of calculation:- a) lumpsum method b) net assets method c) net payments method. 

• net payments method is the most important one. The payments made to the members ( ESH and PSH) of the vendor company alone shall form part of PC. Settlement to debentureholders, creditors etc. & towards liquidation expenses by the purchasing company, are not to be recorded in the books of vendor company. This is para 3(g) of AS 14.

4. stage 2- ledger entries in the books of vendor company. (important step)

• update the balance sheet. 
• record the PC due
• record the receipt of PC.
• distribute the PC amongst various benefiaries.
• transfer of profit/loss to ESH accout.

5.   stage 3- acquisition entries in the books of purchasing company.

pass journal entries fin the books of purchasing company for..

• PC due
• aseets and liabilities taken over
• discharge of PC
• liquidation expenses

6. prepare the new balance sheet of purchasing company.

********

1. This is just a conceptual introduction. this is not enough. you have to get concrete understanding either from accounting faculties or standard textbooks.

2. Practice questions from this area. 

3. In nov2010, the amalgamation problem was silly easy. may the same happens this time. all the best to you...