Dissolution of firm Amalgamation of firm Conversion of firm Absorption of

companies
Amalgamation of
companies

1. Realization Account
a. Closing asset a/c (6points)
b. Closing liabilities a/c (3
points)
c. Realization on asset a/c (2
points)
d. Payment of liabilities a/c
(2 points)
e. Payment of realization
expenses a/c (4 points)
f. Closing of realization a/c
(2)
2. Capital account (balance
of P & L a/c, reserve &
fund, profit & loss on
realization)
3. Distribution of balance
capital
Solvent
Solvent and insolvent
Insolvent (three
methods)
4. Cash a/c: distribution
of cash

Other points
Goodwill account
Profit or loss on
sale of assets
Profit or loss in
payment of
liabilities
Distribution of
A. In the books of
amalgamating firms
1. Revaluation
account
2. Closure of the old
accounts book
3. Transfer of the
accumulated reserves,
profits and losses
4. Unrecorded assets
5. Unrecorded liabilities
6. Close the accounts of
assets & liabilities
taken over by the new
firm
7. Close the accounts of
partners capital
account and new firms
account

B. In the books of new
firm
a. For closing the
accounts of assets and
liabilities taken away
by the new firm
A. In the books of firm
1. Realization Account
a. Closing asset account (3)
b. Closing liabilities a/c
c. Purchase price due to
vendor
d. Realization of asset a/c (2
points)
e. Unrecorded assets a/c (2)
f. Payment of liabilities a/c
(2)
g. Unrecorded liabilities (2)
h. Payment of realization
expenses (firm)
i. Closing of realization a/c
(2)
2. Capital account (balance
of P & L a/c, reserve & fund,
profit & loss on realization)
3. Payment of the
purchase price
4. Distribution of shares
and debentures
5. Balance of cash a/c

B. In the book of
purchasing company

1. Taking over the assets and
liabilities by the
purchasing company
2. Payment of the purchase
price


A. In the books of
firm
1. Realization a/c
a. Closing asset a/c
(4)
b. Closing liabilities
a/c
c. Purchase price
due to vendor
d. Asset not taken
over (3)
e. Liabilities not
taken over (3)
f. Redemption of
debentures &
preference
shares (4)
g. Payment of wind
up expenses (5)
h. Provision of bad
and doubtful
debts
i. Closing of
realization
accounts (2)

2. Shareholder
account
3. Payment of
purchase price
4. Distribution of
shares of the
purchasing
company
5. Transfer of

assets realized
gradually
Proportiona
te capital
method
Maximum
loss method
capital
6. Balance of cash
a/c

B. In the books of
purchasing
company

a. For purchasing the
business
b. Giving away the
assets and
liabilities by the
vendor company
(3)
c. Payment of the
purchase price to
vendor company
d. Payment of wind
up expenses by the
purchasing
company
e. Adjustment of
goodwill to
security premium
a/c