Amalgamation, Conversion & Sale of Partnership Firm

Amalgamation, Conversion &
Sale of Partnership Firm

IPCC Paper 5 Advanced Accounting Chapter 3 Unit 2
CA. K. Shanmuganathan, FCA,ACMA
Learning Objectives
The procedure for amalgamation of firms
Accounting treatment for conversion of firm in the form of

a company.
Method of distribution of shares to partners
Accounting entries in the books of purchasing company /

firm.
2
Amalgamation Of Firms
Accounting Procedure for closing the books of old firms
Step 1:Preparation of Realisation account (including

computation of PC) and transfer of Profit/Loss to
partners capital account in Profit Sharing Ratio.
Step 2: Entries for Goodwill & Reserves.
Step 3: Transfer of assets/ liabilities not taken over in

capital ratio.
Step 4: Transfer of Partners Capital to new firm account

or final settlement.
3
Amalgamation Entry’s
An Intro.
4
Realisation A/c Related Entries
S.NO. PARTICULARS DEBIT CREDIT RS.
RS.
1 Transfer of assets:
Realisation A/c Dr. xxx
To Assets A/c xxx
2 Transfer of Liabilities:
Liabilities A/c Dr. Xxx
To Realisation A/c Xxx
3 Purchase Consideration due:

Purchasing Company or firm A/c Dr xxx
To Realisation A/c xxx
4 Receipt of Purchase Consideration:

Bank A/c Dr. xxx
Share of Purchasing company Dr. xxx
To Purchasing Company A/c xxx
(or )
To Purchasing firm A/c
5
Realisation A/c Related Entries - 2
S.NO. PARTICULARS DEBIT CREDIT

RS. RS.
5 Realisation of assets not taken over at Profit:
Bank A/c (sale proceeds) Dr. xxx
To Realisation A/c (Profit) xxx
To Assets A/c (Book Value) Xxx
6 Realisation of assets not taken over at Loss:

Bank A/c (Sale Proceeds) Dr. xxx
Realisation A/c (Loss) Dr. xxx
To Assets A/c (Book Value) xxx
7 Settlement of liability not taken over at discount:

Liabilities A/c Dr. xxx
To Realisation A/c (Gain) xxx
To Bank A/c xxx
6
Realisation A/c Related Entries - 3
RS. RS.
8 Settlement of liabilities not taken over at more than book
value:
Realisation A/c (Loss) Dr. xxx
To Bank A/c xxx
9 Realisation Expenses:
To Bank A/c xxx
10 Transfer of realisation profit:

To Partners capital A/c xxx
11 Transfer of realisation loss:

Partners Capital A/c Dr. xxx
To Realisation A/c xxx
7
Entries for Goodwill & Reserves
RS.
1 Goodwill A/c Dr. xxx
To Partners Capital A/c xxx
2 Reserves A/c Dr. xxx
8
Transfer of Assets & Liabilities
not taken over at Capital Ratio
RS.
1 Assets :
To Assets A/c xxx
2 Liability:
9
Settlement of Partners
RS.
1 Settlement of Partners:
To Shares/ debentures in
purchasing company A/c xxx
To Bank A/c xxx
To Capital in purchasing firm xxx
10
Purchase Consideration (PC)
} PC = Total Assets taken over } PC = Aggregate of Payments
at agreed value-Liabilities made by Purchasing Company
taken over. in various forms viz cash,
shares & debentures.
NET ASSETS METHOD PAYMENTS METHOD
11
Entries in the Books of Purchasing
Firm
S.NO PARTICULARS DEBIT CREDIT
RS. RS.
1 Assets A/c xxx
Dr xxx
To Liabilities A/c xxx
To Partners Capital A/c
Note: The Partner’s capital A/c will be credited with Capital balances agreed as
purchase consideration in the new firm. ( the amounts used in the settlement
entries of selling firm )
12
ENTRIES IN THE BOOKS OF PURCHASING
COMPANY

RS.
1 Purchase Consideration due:
Business Purchase A/c Dr. xxx
To Partnership Firm A/c xxx
2 Incorporation of assets & liabilities:
Assets A/c xxx
Dr. xxx
To Liabilities A/c xxx
To Business Purchase A/c
Note: The difference in the above entry shall be either Goodwill or

Capital Reserve.
Debit Side Less → Goodwill
Credit Side Less → Capital Reserve
13
ENTRIES CONTINUED
RS. RS.
3 Expenses on taken over / dissolution of
firm paid by purchasing company:
Goodwill (or) Capital Reserve A/c Dr. xxx
To Bank A/c xxx
4 Settlement of Purchase Consideration:
Partnership Firm A/c Dr. xxx
To Equity Share Capital A/c xxx
To Preference Share capital A/c xxx
To Securities Premium A/c xxx
14
Illustaration1
IPCC Dec 2012 PM ( page No.3.28 ) à
Question No.1
15
PROBLEM 1 SOLVING
P and Q are partners of P & On 31st March, 2009 they

Co. sharing Profit and decide to amalgamate and
Losses in the ratio of 3:1 form a new firm M/s PQR & The Balance Sheets of two
and Q and R are partners Co., wherein P,Q and R firms on the above date are
of R & Co., sharing profit would be partners sharing as under:
and losses in the ratio of profits and losses in the
2:1. ratio of 3:2:1.
16
PROBLEM 1 CONT….
LIABILITIES P &CO. R & CO.
RS. RS.
Capital
P 2,40,000 -
Q 1,60,000 2,00,000
R - 1,00,000
Reserves 50,000 1,50,000
Sundry Creditors 1,20,000 1,16,000
Due to P & Co. - 1,00,000
Bank Overdraft 80,000 -
Total 6,50,000 6,66,000
17
Problem Statement
ASSETS P &CO. R & CO.
RS. RS.
Fixed Assets:
Building 50,000 60,000
Plant & Machinery 1,50,000 1,60,000
Office Equipment 20,000 6,000
Current Assets:
Stock-in-trade 1,20,000 1,40,000
Sundry debtors 1,60,000 2,00,00
Bank balance 30,000 90,000
Cash in hand 20,000 10,000
Due from R & Co. 1,00,000 -
Total 6,50,000 6,66,000
18
Problem Statement - 2
The amalgamated firm took over the business on

the following terms:
(a) Building of P & Co., was valued at Rs Rs.1,00,000
(b) Plant and Machinery of P & Co., was valued at Rs. 2,50,000 and that of R & Co., at
Rs. 2,00,000
(c) All stock in trade is to be appreciated by 20%
(d) Goodwill valued of P & Co. at Rs. 1,20,000 and R & Co., Rs.60,000 but the same will
not appear in the books of PQR & Co.,
(e) Partners of a new firm will bring the necessary cash to pay other partners to adjust
their capitals according to the profit sharing ratio.
(f) Provisions for doubtful debts has to be carried forward at Rs. 12,000 in respect of
debtors of P& Co., and Rs.26000 in respect of debtors of R & Co.,
19
Problem Statement - 3
You are required to prepare the

Balance Sheet of new firm and
capital accounts of the partners
in the books of old firms.
20
.
. SOLUTION
21
Working Note1: Purchase Consideration
PARTICULARS P & Co. R & Co.

Assets:
Good will 1,20,000 60,000
22
Working Note: Purchase Consideration

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
23

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
24

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
Office equipments 20,000 6,000
25

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
Stock – in – trade 1,44,000 1,68,000
26

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
Stock – in – trade 1,44,000 1,68,000
27

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
Stock – in – trade 1,44,000 1,68,000
28

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
Stock – in – trade 1,44,000 1,68,000
Cash in hand 20,000 10,000
29

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
Stock – in – trade 1,44,000 1,68,000
Cash in hand 20,000 10,000
Due from R & Co. 1,00,000 -
30

Assets:
Good will 1,20,000 60,000
Building 1,00,000 60,000
Stock – in – trade 1,44,000 1,68,000
Cash in hand 20,000 10,000
Due from R & Co. 1,00,000 -
Total Assets ( A ) 9,44,000 7,94,000
31
Working Note: Purchase Consideration - 2

Liabilities:
Creditors 1,20,000 1,16,000
32

Liabilities:
Creditors 1,20,000 1,16,000
Provision for doubtful debts 12,000 26,000
33

Liabilities:
Creditors 1,20,000 1,16,000
Due to P & Co. - 1,00,000
34

Liabilities:
Creditors 1,20,000 1,16,000
Due to P & Co. - 1,00,000
Bank overdraft 80,000 -
35

Liabilities:
Creditors 1,20,000 1,16,000
Due to P & Co. - 1,00,000
Total Liabilities ( B ) 2,12,000 2,42,000
36

Liabilities:
Creditors 1,20,000 1,16,000
Due to P & Co. - 1,00,000
Total Liabilities ( B ) 2,12,000 2,42,000
Purchase consideration = A - B 7,32,000 5,52,000
37
WN2 BOOKS OF SELLING FIRM P &
Co. – REALISATION A/C
38
PARTICULARS RS. PARTICULARS RS.
To Building 50,000
39
To Building 50,000
To Plant & Machinery 1,50,000
40
To Building 50,000
To Office equipments 20,000
41
To Building 50,000
To Stock-in-trade 1,20,000
42
To Building 50,000
To Sundry Debtors 1,60,000
43
To Building 50,000
To Bank balance 30,000
44
To Building 50,000
To Cash in hand 20,000
45
To Building 50,000
To Due from R & Co 1,00,000
46
To Building 50,000 By Creditors 1,20,000
47
To Plant & Machinery 1,50,000 By Bank Overdraft 80,000
48
To Office equipments 20,000 By M/s PQR & Co. (PC) 7,32,000
To Stock-in-trade 1,20,000 W.N.1
9,32,000
49
To Office equipments 20,000 By M/s PQR & Co. (PC) 7,32,000
To Stock-in-trade 1,20,000 W.N.1
To Partners’ Capital A/cs
P 2,11,500
Q 70,500 2,82,000
9,32,000 9,32,000
50
BOOKS OF SELLING FIRM P & CO-
PARTNERS’ CAPITAL A/C
PARTICULARS P Q PARTICULARS P Q
RS. RS. RS. RS.
To Capital A/cs 4,89,000 2,43,000 By Balance b/d 2,40,000 1,60,000
M/s PQR & Co
By Reserve (3:1) 37,500 12,500
By Profit of
Realisation A/c 2,11,500 70,500
(W.N.4)
4,89,000 2,43,000 4,89,000 2,43,000
51
WN3 BOOKS OF SELLING FIRM R & Co. –
REALISATION A/C
52
REALISATION A/C

To Building 60,000
53
REALISATION A/C

To Building 60,000
54
REALISATION A/C

To Building 60,000
To Office Equipment 6,000
55
REALISATION A/C

To Building 60,000
56
REALISATION A/C

To Building 60,000
57
REALISATION A/C

To Building 60,000
58
REALISATION A/C

To Building 60,000
59
REALISATION A/C

60
REALISATION A/C

To Plant & Machinery 1,60,000 By Due to P & Co. 1,00,000
61
REALISATION A/C

To Office Equipment 6,000 By M/s PQR & Co. 5,52,000
To Stock-in-trade 1,40,000 (PC)W.N.1
7,68,000
62
REALISATION A/C

To Office Equipment 6,000 By M/s PQR & Co. 5,52,000
To Stock-in-trade 1,40,000 (PC)W.N.1
To Partners’ Capital A/cs
Q 68,000
R 34,000 1,02,000
7,68,000 7,68,000
63
BOOKS OF SELLING FIRM R & CO-
64
PARTICULARS Q R PARTICULARS Q R
RS. RS. RS. RS.
By Balance b/d 2,00,000 1,00,000
65
RS. RS. RS. RS.
By Balance b/d 2,00,000 1,00,000
By Reserve (2:1) 1,00,000 50,000
66
RS. RS. RS. RS.
By Balance b/d 2,00,000 1,00,000
By Reserve (2:1) 1,00,000 50,000

By Realisation
A/c (W.N.5) 68,000 34,000
( profit )
3,68,000 1,84,000
67
RS. RS. RS. RS.
To Capital A/c s 3,68,000 1,84,000 By Balance b/d 2,00,000 1,00,000
M/s PQR & Co
By Reserve (2:1) 1,00,000 50,000
By Realisation
A/c (W.N.5) 68,000 34,000
( profit )
3,68,000 1,84,000 3,68,000 1,84,000
68
WN4 COMPUTATION OF PROPORTIONATE
CAPITAL
RS.
M/s PQR & Co. (PC) (Rs.7,32,000+Rs.5,52,000) 12,84,000
Less: Goodwill Adjustment (1,80,000)
Total Capital of New firm (Distributed in ratio 3:2:1) 11,04,000
P’s proportionate capital 5,52,000
Q’s proportionate capital 3,68,000
R’s Proportionate capital 1,84,000
69
WN3 Computation of capital
adjustments
70
adjustments
P Q R TOTAL
RS. RS. RS. RS.
Balance transferred from P & Co. 4,89,000 2,43,000 7,32,000
71
adjustments
P Q R TOTAL
RS. RS. RS. RS.
Balance transferred from R & Co. 3,68,000 1,84,000 5,52,000
72
adjustments
P Q R TOTAL
RS. RS. RS. RS.
4,89,000 6,11,000 1,84,000 12,84,000
73
adjustments
P Q R TOTAL
RS. RS. RS. RS.
4,89,000 6,11,000 1,84,000 12,84,000
Less: Goodwill written off (3:2:1) (90,000) (60,000) (30,000) (1,80,000)
74
adjustments
P Q R TOTAL
RS. RS. RS. RS.
4,89,000 6,11,000 1,84,000 12,84,000
Existing Capital 3,99,000 5,51,000 1,54,000 11,04,000
75
adjustments
P Q R TOTAL
RS. RS. RS. RS.
4,89,000 6,11,000 1,84,000 12,84,000
Proportionate Capital 5,52,000 3,68,000 1,84,000 11,04,000
76
adjustments
P Q R TOTAL
RS. RS. RS. RS.
4,89,000 6,11,000 1,84,000 12,84,000
Proportionate Capital 5,52,000 3,68,000 1,84,000 11,04,000
Amount to be brought in (Paid Off) 1,53,000 (1,83,000) 30,000
77
BALANCE SHEET OF M/S PQR & CO. AS AT
31ST MARCH,2009
78
31ST MARCH,2009
LIABILITIES: RS. RS.

Capital
P 5,52,000
Q 3,68,000
R 1,84,000 11,04,000
79
31ST MARCH,2009

Capital
P 5,52,000
Q 3,68,000
R 1,84,000 11,04,000
Sundry Creditors (Rs.1,20,000+Rs.1,16,000) 2,36,000
80
31ST MARCH,2009

Capital
P 5,52,000
Q 3,68,000
R 1,84,000 11,04,000
Bank Overdraft 80,000
81
31ST MARCH,2009

Capital
P 5,52,000
Q 3,68,000
R 1,84,000 11,04,000
Bank Overdraft 80,000
14,20,000
82
BALANCE SHEET CONT….
ASSETS: RS. RS.
83
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
84
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
Plant & Machinery (Rs.2,50,000+Rs.2,00,000) 4,50,000
85
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
Office Equipment(Rs.20,000+Rs.6,000) 26,000
86
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
Stock-in-trade (Rs.1,44,000+Rs.1,68,000) 3,12,000
87
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
Sundry Debtors (Rs.1,60,000+Rs.2,00,000) 3,60,000
88
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
Less: Provision for doubtful debts (38,000) 3,22,000
(Rs.12,000+Rs.26,000)
89
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
(Rs.12,000+Rs.26,000)
Bank balance (Rs.30,000+Rs.90,000) 1,20,000
90
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
(Rs.12,000+Rs.26,000)
Cash in Hand 30,000*
91
ASSETS: RS. RS.
Building (Rs.1,00,000+Rs.60,000) 1,60,000
(Rs.12,000+Rs.26,000)
Cash in Hand 30,000*
14,20,000
92
*Cash – in - hand
}Cash taken over from P & co 20,000
Add: Cash taken over from R & co. 10,000
Add: Cash brought in by P 1,53,000
Add: Cash brought in by R 30,000
-----------
2,13,000
Less: Cash paid to Partner Q 1,83,000
-----------
Closing balance 30,000
93
Illustration 2
IPCC RTP NOV 2011 Question 2 (
modified )
94
PROBLEM 2 SOLVING
2.Ramesh,Roshan and Rohan were

partners of the firm ‘3R Enterprises’
sharing profits and losses in the ratio
of 3:2:1 respectively. On 31st
march,2011 their Balance Sheet
stood as follows :
95
PROBLEM 2 CONT…..
LIABILITIES Rs. ASSETS Rs.
Ramesh’s Capital A/c 16,80,000 Land and Buildings 14,00,000

Roshan’s Capital A/c 11,60,000 Machinery 11,00,000
Rohan’s Capital A/c 6,70,000 Furniture 6,10,000
General Reserve 6,30,000 Stock 8,40,000
Creditors 6,00,000 Debtors 6,00,000
Cash at Bank 1,90,000
47,40,000 47,40,000
96
PROBLEM 2 CONT….
On the above-mentioned date, the partners decided to convert their firm into a
private limited company and named it ‘3R Enterprises (Private) Ltd’.
The Company took over all the assets including cash at bank and all the
creditors for Rs.42,00,000 payable in the form of fully paid equity shares of
Rs.10 each.
It recorded in its books, land and buildings at Rs. 16,40,000 machinery at

Rs.9,90,000 and created a provision for bad debts @5% on debtors.
The expenses of the take-over came to Rs.23,000 which were paid and borne by
the company.
97
PROBLEM 2 CONT….
The expenses of getting the company incorporate were Rs.57,000
The partners distributed the company’s shares amongst themselves in

their profit sharing ratio. The settled their accounts by paying or
receiving cash
Prepare Realisation Account and all the partners’ capital accounts in the
firm’s ledger and pass journal entries in the books of the company and
Balance Sheet after incorporating the transactions mentioned above.
98
JOURNAL ENTRIES
99
JOURNAL ENTRIES
S. Particulars l.F Dr Cr
NO No (Rs.) (Rs.)
1. Business Purchase A/c - Dr 42,00,000
To M/s 3R Enterprises Pvt Ltd –A/c 42,00,000
(Consideration Payable for business purchase)
10
0
JOURNAL ENTRIES
S. Particulars l.F Dr Cr
NO No (Rs.) (Rs.)
1. Business Purchase A/c - Dr 42,00,000
To M/s 3R Enterprises Pvt Ltd –A/c 42,00,000
(Consideration Payable for business purchase)
2. Land and Building A/c - Dr 16,40,000

Machinery A/c - Dr 9,90,000
Furniture A/c - Dr 6,10,000
Stock - A/c - Dr 8,40,000
Debtors –A/C - Dr 6,00,000
Bank – A/c - Dr 1,90,000
To Creditors A/c 6,00,000
To Provision for Doubtful debts A/c 30,000
To Business Purchase A/c 42,00,000
To Capital Reserve A/c 40,000
(Assets and liabilities taken over for Rs.42,00,000
balance Cr to Capital Reserve
10
1
JOURNAL ENTRIES CONT….
S. Particulars LF Dr Cr
NO NO (Rs.) (Rs.)
3. Capital Reserve-A/c - Dr 23,000
To Bank A/c 23,000
(Expenses for take over debited to Capital Reserve)
10
2
NO NO (Rs.) (Rs.)
To Bank A/c 23,000
4. M/s 3R Enterprises expeses A/c- Dr 42,00,000
To Equity Shares Capital A/C 42,00,000
(Allotment of fully paid equity shares to discharge
consideration for business)
10
3
NO NO (Rs.) (Rs.)
To Bank A/c 23,000
4. M/s 3R Enterprises expeses A/c- Dr 42,00,000
To Equity Shares Capital A/C 42,00,000
(Allotment of fully paid equity shares to discharge
consideration for business)
5. Preliminary expenses A/c - Dr 57,000
To Bank A/c 57,000
(Expenses incurred to get the company
incorporated)
10
4
IN THE BOOKS OF 3R ENTERPRISES
REALISATION A/C
10
5
REALISATION A/C
Particulars Rs. Particulars Rs.

To Land and Buildings 14,00,000
10
6
REALISATION A/C

To Machinery 11,00,000
10
7
REALISATION A/C

To Furniture 6,10,000
10
8
REALISATION A/C

To Stock 8,40,000
10
9
REALISATION A/C

To Stock 8,40,000
To Debtors 6,00,000
11
0
REALISATION A/C

To Stock 8,40,000
To Debtors 6,00,000
To Cash at Bank 1,90,000
11
1
REALISATION A/C

To Land and Buildings 14,00,000 By Creditors 6,00,000
To Stock 8,40,000
To Debtors 6,00,000
11
2
REALISATION A/C

To Machinery 11,00,000 By 3R Enterprises 42,00,000
To Stock 8,40,000
To Debtors 6,00,000
48,00,00
11
3
REALISATION A/C

To Machinery 11,00,000 By 3R Enterprises 42,00,000
To Stock 8,40,000
To Debtors 6,00,000
To Ramesh’s Capital A/c 30,000
To Roshan’s Capital A/c 20,000
To Rohan’s Capital A/c 10,000
48,00,000 48,00,00
11
4
PARTNERS CAPITAL A/C
11
5
Dr Ramesh Roshan Rohan
Particulars
Rs. Rs. Rs.
To Shares in 3R Enterprises pvt Ltd 21,00,000 14,00,000 7,00,000
A/c
11
6
Particulars
Rs. Rs. Rs.
A/c
To Bank A/c 85,000
11
7
Particulars
Rs. Rs. Rs.
A/c
To Bank A/c 85,000
Total 21,00,000 14,00,000 7,85,000
11
8
Cr Ramesh Roshan Rohan
By Balance b/d 16,80,000 11,60,000 6,70,000
11
9
By Balance b/d 16,80,000 11,60,000 6,70,000
By General Reserve 3,15,000 2,10,000 1,05,000
12
0
By Balance b/d 16,80,000 11,60,000 6,70,000
By Realisation A/c (Profit) 30,000 20,000 10,000
12
1
By Balance b/d 16,80,000 11,60,000 6,70,000
By Bank A/c (Settlement) 75,000 10,000 -
Total 21,00,000 14,00,000 7,85,000
12
2
Particulars
Rs. Rs. Rs.
A/c
To Bank A/c 85,000
21,00,000 14,00,000 7,85,000
Total
Cr
By Balance b/d 16,80,000 11,60,000 6,70,000
By Bank A/c (Settlement) 75,000 10,000 -
Total 21,00,000 14,00,000 7,85,000
12
3
BALANCE SHEET OF 3R ENTERPRISES PVT.
LTD.
12
4
LTD.
EQUITY & LIABILITIES NOTE NO. RS.

1. Shareholders Funds:
Share Capital 1 42,00,000
12
5
LTD.

Reserves & Surplus 2 (40,000)
12
6
LTD.

2. Non Current Liabilities: -
12
7
LTD.

3. Current Liabilities:
Trade Payables 3 6,00,000
12
8
LTD.

Provisions 4 30,000
12
9
LTD.

Provisions 4 30,000
47,90,000
13
0
ASSETS NOTE NO. RS.
1. Non Current Assets:
Tangible Fixed Assets 5 32,40,000
13
1
ASSETS NOTE NO. RS.
1. Non Current Assets:
Tangible Fixed Assets 5 32,40,000
2. Current Assets:
Inventory 8,40,000
Trade Receivables 6,00,000
Cash & Cash Equivalent 6 1,10,000
47,90,000
13
2
NOTES TO BALANCE SHEET
13
3
PARTICULARS RS.
1. Share Capital:
4,20,000 Equity Shares of Rs.10 each 42,00,000
42,00,000
13
4
PARTICULARS RS.
2. Reserves & Surplus:
Capital Reserve 17,000
Profit & Loss Account (57,000)#
40,000
# As per AS 26 Preliminary expenses written off to P & L
13
5
PARTICULARS RS.
3. Trade Payables:
Creditors 6,00,000
4.Provisions:
Provision for Bad debts 30,000
13
6
PARTICULARS RS.
4.Provisions:
Provision for Bad debts 30,000
13
7
NOTES CONT….
PARTICULARS RS.
5. Tangible Fixed Assets:
Land 16,40,000
Machinery 9,90,000
Furniture 6,10,000
Total 32,40,000
13
8
NOTES CONT….
PARTICULARS RS.
6.Cash & Cash Equivalent:
Bank balance 1,90,000
Less: Expenses Taken Over (23,000)
Less: Preliminary Expenses written off (52,000)
Net Bank Balance 1,10,000
13
9
Lesson Summary
} Preparation of accounting entries in selling firm (

specifically closure of books )
} Opening entries in purchasing firm /company books
} Preparation of Balance sheet of purchasing firm or
company
} When one firm merged with another existing firm,
entries will be made in the pattern of winding up in
the firm ceases to exist. The other firm will record it
as business purchase.
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Amalgamation, Conversion &

Sale of Partnership Firm

The procedure for amalgamation of firms

Accounting treatment for conversion of firm in the form of

Method of distribution of shares to partners

Accounting entries in the books of purchasing company /

Accounting Procedure for closing the books of old firms

Step 1:Preparation of Realisation account (including

Step 2: Entries for Goodwill & Reserves.

Step 3: Transfer of assets/ liabilities not taken over in

Step 4: Transfer of Partners Capital to new firm account

3 Purchase Consideration due:

4 Receipt of Purchase Consideration:

S.NO. PARTICULARS DEBIT CREDIT

6 Realisation of assets not taken over at Loss:

7 Settlement of liability not taken over at discount:

10 Transfer of realisation profit:

11 Transfer of realisation loss:

NET ASSETS METHOD PAYMENTS METHOD

S.NO. PARTICULARS DEBIT CREDIT RS.

Note: The difference in the above entry shall be either Goodwill or

P and Q are partners of P & On 31st March, 2009 they

The amalgamated firm took over the business on

(c) All stock in trade is to be appreciated by 20%

You are required to prepare the

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS P & Co. R & Co.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

PARTICULARS RS. PARTICULARS RS.

By Reserve (2:1) 1,00,000 50,000

By Reserve (2:1) 1,00,000 50,000

LIABILITIES: RS. RS.

LIABILITIES: RS. RS.

LIABILITIES: RS. RS.