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What is amalgamation absorption and reconstruction?
1. F.Y.B.Com. AMALGAMATION: When two or more companies go into liquidation and one new company is formed it is called amalgamation. ABSORPTION: When weaker company is taken over by another existing stronger company it is called absorption.
What is amalgamation absorption and reconstruction and give the differences?
In a nutshell, in Amalgamation, the two companies are liquidated to form a new company, but in Absorption, only the merged company goes into liquidation, but there is no formation of a new company.
What is amalgamation absorption?
Both amalgamation and absorption relate to the merger of two or more companies. Amalgamation occurs, when two or more companies decide to unite to carry on their business together. Absorption is a form of merger where there is a combination of two or more companies into an ‘existing company’.
What is absorption and external reconstruction?
A and B companies accepts and close their business after getting purchase price from C company. This is the simple case of absorption. Meaning of Reconstruction. If any company is suffering loss and it close its business and join with or without other company, it create new company. That is called reconstruction.
What is the difference between internal and external reconstruction?
Internal reconstruction is a method of corporate restructuring where an arrangement is made by the company of the organization where in changes in the assets and liabilities are made to improve the financial position without liquidating the company or transferring the ownership to external party, whereas external …
What is merger and types?
A merger is the voluntary fusion of two companies on broadly equal terms into one new legal entity. The five major types of mergers are conglomerate, congeneric, market extension, horizontal, and vertical.
What are the types of amalgamation?
Two types of amalgamations exist: amalgamation in the nature of a merger and amalgamation in the nature of a purchase. An amalgamation in the nature of a merger is a transaction that works more like a merger.
What is the external reconstruction?
In other words, external reconstruction refers to the sale of the business of existing company to another company formed for the purposed. In external reconstruction, one company is liquidated and another new company is formed.
What are the two types of amalgamation?
Two types of amalgamations exist: amalgamation in the nature of a merger and amalgamation in the nature of a purchase.
What does amalgamation, absorption and external reconstruction mean?
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.
Which is the best description of an amalgamation?
Amalgamation is a combination of one or more companies into a new entity. In financial terms, Amalgamation is a fusion between two or more companies to consolidate their business activities by establishing a new company having a separate legal existence. Types or methods of Amalgamation and Method of accounting of amalgamation:
How is the amalgamation Adjustment Account is shown in balance?
According to Accounting standard 14 “Accounting for amalgamation” issued by ICAI, an amalgamation adjustment account arises when certain statutory reserves need to be maintained by the transferee company which was previously maintained in the books of transferor company.