When the merger involves liquidation of one existing sick company and formation of one new company, it is called a) internal reconstruction b) absorption c) external reconstruction d) amalgamation 12. There are at least three companies involved in the process of Amalgamation. 10 paid-up. Amalgamation means the liquidation of one or more companies and transfer of business of liquidated entities to another entity. Assets Rs. Holding Company 10. Introduction To Amalgamation; Amalgamation of companies results in combination of companies, but external reconstruction does not result in any such combination. goes in to liquidation to reconstruct externally and a new company (new company co. ltd) to take over the business of exiting company, it is called external reconstruction. Ist - External Reconstruction. Amalgamation is defined as the combination of one or more companies into a new entity. Amalgamation of companies involves liquidation of two or more companies, while external reconstruction involves liquidation of only one company, 2. 2. When two or more companies carrying on similar business decide to combine, a new company is formed, it is known as ..... (A) Amalgamation (B) Absorption (C) Internal reconstruction (D) External reconstruction 2. ABSORPTION External reconstruction b. absorption c. amalgamation 4. Under external reconstruction there is one liquidation and one formation. On 31st March, 2012, Thin Ltd. was absorbed by Thick Ltd., the latter taking over all the assets … The term includes absorption There may be amalgamation either transfer of two or more undertakings to an existing company or new company. Course Includes: 6 Classes . 15 each, credited with Rs. Accounting standard (AS) 14 not distinguish between amalgamation and absorption. In amalgamation, the identity of both the companies exist and survive. Solved Questions: No. Amalgamation of companies results in combination of companies, but external reconstruction does not result in any such combination. Device- Android | Mobile App No. ... AMALGAMATION, ABSORPTION AND EXTERNAL RECONSTRUCTION. b) External reconstruction. b) External reconstruction. One new company is specifically incorporated to take over another existing loss making company. Amalgamation and External Reconstruction: Problem # 4. (i) In external reconstruction, only one existing company is involved whereas in amalgamation, there are at least two existing companies which amalgamate. c) Amalgamation. The accounting procedure of external reconstruction is similar to that of amalgamation and absorption. a) internal reconstruction b) absorption c) external reconstruction d) amalgamation 11. 5. Differences between absorption and external reconstruction 1. 2. 3. 2,000 and Stock Rs. 23 Videos . Redemption of Preference Shares and Buy Back of Equity Shares 9. Expand. Future retail Ltd is liquidated and a new company Future Enterprises is formed to take over its business. Two or more existing company decides to amalgamate & starts a new company. The purchase consideration was to be satisfied by the allotment of 20,000 10% preference shares of Rs. Conversely, in Absorption, only two companies are involved. Right and Bonus Shares 14. Downloadable PDF Notes. In amalgamation, the formation of the new company is there while in absorption no such new company is formed. Basis Amalgamation Absorption External Reconstruction Meaning . Amalgamation, absorption. Unlimited Views. Amalgamation: Existing company A takes over the business of another existing company B which is wound up. Subject- Advanced Accounting. 6. While under the process of Absorption, there are only two companies. Of lectures- 8. When the merger involves liquidation of one existing sick company and formation of one new company, it is called (a) internal reconstruction (b) absorption (c) external reconstruction (d) amalgamation 12.A feature which is common in all cases of merger viz. Differences between absorption and external reconstruction Video Lectures: No. View Answer Answer: Amalgamation ... Realisation A/c 33 If the market price of the shares to be given for Purchase Consideration at the time of absorption, of the share is to be determined A Intrinsic Value. A new company is floated to take over their business. AMALGAMATION. Amalgamation of companies involves liquidation of two or more companies, while external reconstruction involves liquidation of only one company, 2. External Reconstruction: Wallace Ltd. is absorbed by Bharat Ltd. Absorption is the process in which the one leading company takes control over the weaker company. a. external reconstruction b. absorption c. amalgamation 3. if the business of ABC Limited , a loss-making company is taken over by a new company ABC (New) Limited ,it is called a. Such external reconstruction is essen-tially covered under the category ‘amalgamation in the nature of merger’ in AS (Accounting Standard) 14, Accounting for Amalgamations. Amalgamation is a process in which two companies liquidate to create a new company, which takes over the business of the liquidating companies. The transferor companies lose their identity to form a new company (transferee company). It includes absorption of one company by the other company. 12,000, Furniture Rs. Share Capital Goodwill 50,000 5. AS – 1 b. (c) external reconstruction (d) amalgamation 11. two amalgamating companies and one new company which is formed by the fusion of the two companies. Absorption: A New Company X is formed to take over the business of an existing company Y which is wound up. Amalgamation Absorption & External reconstruction (Continue…) 1. Amalgamation is a fusion between two or more companies to consolidate their business activities by establishing a new company having a separate legal existence. Absorption is the process in which the one leading company takes control over the weaker company. Note : In Amalgamation & Absorption there is combing of two or more business & are covered by AS-14 External Reconstruction: When a new company is formed to take over an existing company it is known as external reconstruction. AMALGAMATION Ab.Ltd A.Ltd B.Ltd One or more companies are liquidated One new company is formed The nature of business of both companies is similar. B Fair Value. Meaning: Amalgamation is a fusion between two or more companies to consolidate their business activities by establishing a new company having a separate legal existence. 6. Two being liquidated and one being formed. No external device can be attached for viewing the classes. For e.g. 6. Absorption is said to take place when an existing company takes over one or more existing companies. external reconstruction. a) Absorption. All the combining companies are liquidated. Example: Business of X ltd is transferred in to a new X Ltd is an example of External reconstruction.

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