ACCOUNTING TREATMENT FOR AMALGAMATION

In the books of the transferee company:

All the amalgamation entries should be passed in the usual way either under
pooling of interest method or purchase method.
a) To eliminate mutual debt included in creditors and debtors:
Sundry creditors a/c Dr
To sundry debtor’s a/c
b) To eliminate mutual debt included in B/R and B /P:
Bill payable a/c Dr
To Bills receivable a/c
c) To eliminate mutual debt included in loan given and loan taken:
Loan (given) a/c Dr
To Loan (taken) a/c
Note: the entry is the same whether transferee co. owes money to Transferor Company or
vice versa.

Model journal entries in the books of Transferor Company (or) selling company
Particulars Amount Amount
For transferring Asset to Realization, A/c
Realization a/c Dr XXXX
To sundry assets a/c (individual assets) XXXX
(Being transfer of assets to realization Account)
For transferring liabilities taken over:
Liabilities a/c Dr (individual liability) XXXX
To Realizations a/c XXXX
(Being transfer of liabilities taken over)
For purchase consideration receivable:
Purchasing company, a/c Dr XXXX
To Realization a/c XXXX
(Being purchase price receivable)
For receiving the purchase consideration
Bank a/c Dr XXXX
Shares in purchasing Co. a/c Dr XXXX
(at agreed value)
To purchase company a/c XXXX
(Being purchase price received in the form of cash, shares &
from the purchasing company)
For realizing assets not taken over
Bank a/c Dr XXXX
To realization a/c XXXX
(Being asset not taken over realized
For payment of liabilities not taken over
Liability a/c (Book value) Dr
Realization a/c (any premium) Dr XXXX
To Bank a/c (actual amount paid) XXXX
To Realization a/c (any discount on repayment) XXXX
(Being repayment of liability at premium /discount) XXXX
For payment of realization expenses
a. If expenses are to be borne by selling company or
expense payable by purchasing company are already
added to the purchase consideration
Realization a/c Dr XXXX
To Bank a/c XXXX

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 (Being payment of expenses of realization)
b. If expense is to be borne by purchasing company
And they are not a part of purchase price
Purchasing company, a/c Dr XXXX
To Bank a/c XXXX
(Being expense paid on behalf of purchasing company)
Bank a/c Dr XXXX
To Purchasing company a/c XXXX
(being expense paid reimbursed by the purchasing company)

Particulars Amount Amount

For discharging the debentures
a) Repayable at a premium
Debentures a/c (face value) Dr XXXX
Realization a/c (Premium) Dr XXXX
To debenture holder a/c XXXX
(Being transfer of debenture and premium
payable credited to debenture holder)
b) For repayment at discount
Debentures a/c (face value) Dr XXXX
To debenture holder a/c XXXX
To Realization a/c (discount) XXXX
(Being transfer of debenture after
adjusting discount on repayment
c)for payment to debenture holders
Debenture holder’s a/c Dr XXXX
To Bank a/c (if cash is paid) XXXX
To debentures in purchasing company a/c XXXX
(Being settlement of the claim of debenture holders)
For discharge of preference share capital
a) for repayment at premium
Preference share capital a/c Dr XXXX
Realization a/c Dr XXXX
To Preference share holder a/c XXXX
(Being transfer of preference share capital and
premium payable to the preference shareholder)
for repayment at discount
preference share capital a/c Dr XXXX
To preference shareholders a/c XXXX
To Realization a/c (discount) a/c XXXX
(Being transfer of preference share capital,
after adjusting discount on repayment)
b) For repayment to preference shareholders
Preference shareholder a/c Dr XXXX
To Bank a/c XXXX
To shares in purchasing co. a/c XXXX
(Being settlement of the claim of preference shareholders)
For transfer of equity share capital and accumulated profits
Equity share capital a/c Dr XXXX
General reserve a/c Dr XXXX
Profit and loss a/c Dr XXXX
Any other reserve a/c Dr XXXX
To equity shareholders a/c XXXX
(Being transfer of capital and accumulated

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 profits to the equity shareholders)

Particulars Amount Amount

For transfer of accumulated losses
Equity shareholders a/c Dr XXXX
To Profit and loss a/c XXXX
To preliminary expense a/c XXXX
To discount on issue of shares a/c XXXX
(Being transfer of accumulated losses
to the equity Shareholders)
For realization of profits /Losses
a) If there is profit on realization
Realization a/c Dr XXXX
To equity shareholders a/c XXXX
b) If there is loss on realization
Equity shareholders a/c Dr XXXX
To realization a/c XXXX
For final payment to the equity shareholders
Equity shareholders a/c Dr XXXX
To bank a/c XXXX
To Shares in purchasing Co. (if shares in XXXX
purchasing Co. are given)
(Being final payment made to the equity shareholders)

Model Journal entries in the books of Transferee Company or Purchasing Company

I. in case amalgamation in the nature of merger, under pooling of interest method
Particulars Amount Amount
For purchase consideration payable
Business purchase a/c Dr XXXX
To liquidator of transferor company XXXX
(Being purchase price payable)
For assets and liabilities
Sundry assets a/c Dr XXXX
(each asset separately) XXXX
To sundry liabilities (each P&L a/c) XXXX
To profit and loss a/c XXXX
To Reserves (each reserve separately)
(Being assets and liabilities taken over and
reserves of transferor company recorded)

For Payment of purchase price; XXXX

Liquidator of transferor company a/c Dr XXXX
To Bank a/c XXXX
To share capital a/c XXXX
To Share premium a/c
(Being shares issued to settle the purchase consideration)

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 For payment of purchase price:

Liquidator of transferor company a/c Dr XXXX

To bank a/c XXXX
To share capital a/c XXXX
To share premium a/c XXXX
(Being shares issued to settle the purchase consideration)

Particulars Amount Amount

For expense of winding up paid by Transferee company
General reserve a/c Dr XXXX
To Bank a/c XXXX
(Being expense of transferee company paid as per agreement)

For formation expense paid:

Preliminary expense a/c Dr XXXX
To bank a/c XXXX
(Being formation expense paid)
For payment of any debentures of transferor company
Debentures (transferor co) a/c Dr XXXX
To debenture a/c XXXX
To bank a/c XXXX
(being payment made to debenture holders of transferor
company as per agreement)
For repayment to creditors of transferor company
Creditors (transferor co) a/c dr XXXX
To Bank a/c XXXX
(being payment as per agreement)

II. In case of amalgamation in the nature of purchase under purchase method:

Particulars Amount Amount
For purchase consideration payable
Business purchase a/c dr XXXX
To Liquidator of transferee company, a/c XXXX
(being purchase price payable)
For assets and liabilities taken over
Sundry assets a/c dr XXXX
(each asset separately)
Goodwill a/c dr XXXX
To sundry liabilities a/c XXXX
To Business purchase a/c XXXX
To Capital reserve a/c XXXX
(Being assets and liabilities taken over
and goodwill /capital reserve
For payment of purchase price
Liquidator of selling Co a/c Dr XXXX
To bank a/c XXXX
To share capital a/c XXXX
To share premium a/c XXXX
To debentures a/c XXXX
(Being purchase price paid in the form of cash,
shares and debentures)

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For expense of liquidators agreed to be paid by
transferee co XXXX
Goodwill a/c Dr XXXX
To bank a/c
(being expense agreed to be paid)
Particulars Amount Amount
For formation expense of transferee Co.
Preliminary expense a/c dr XXXX
To bank a/c XXXX
(Being formation expense paid)
For statutory reserves of the transferor company to be
continued XXXX
Amalgamation adjustment a/c Dr XXXX
To statutory reserves a/c
(Being reserves to be continued)
For settlement of debentures holders or creditors of
transferor company. XXXX
Debentures (transferor co.) a/c dr XXXX
Creditors (transferee co.) a/c dr XXXX
To Debentures a/c XXXX
To Bank a/c
(Being settlement of transferor co.’s liabilities as per
agreement)