by When a company is amalgamated (or absorbed), it must close its books, transfer all assets and liabilities to the transferee, and settle accounts with shareholders.
📘 1. Realisation Account
| Entry No. | Particulars | Journal Entry |
|---|---|---|
| 1 | Transfer of assets | Realisation A/c Dr. Â Â Â Â To Asset A/c (Individually) |
| 2 | Transfer of liabilities | Liability A/c Dr. Â Â Â Â To Realisation A/c |
| 3 | Sale of business to transferee company | Transferee Company A/c Dr. Â Â Â Â To Realisation A/c |
| 4 | Realisation expenses paid (if any) | Realisation A/c Dr. Â Â Â Â To Bank A/c |
| 5 | Profit/Loss transferred to shareholders | If profit: Realisation A/c Dr. Â Â Â Â To Equity SH A/c If loss: Equity SH A/c Dr. Â Â Â Â To Realisation A/c |
📘 2. Transferee Company Account
| Entry No. | Particulars | Journal Entry |
|---|---|---|
| 6 | For receiving purchase consideration | Shares A/c / Bank A/c Dr. Â Â Â Â To Transferee Company A/c |
📘 3. Equity Shareholders Account
| Entry No. | Particulars | Journal Entry |
|---|---|---|
| 7 | Transfer of share capital and reserves | Share Capital A/c Dr. General Reserve A/c Dr. P&L A/c Dr. Â Â Â Â To Equity SH A/c |
| 8 | Settlement with shareholders (in shares/cash) | Equity SH A/c Dr. Â Â Â Â To Shares A/c / Bank A/c |
Incorporation Entries in the Books of the Transferee Company
These are initial entries made in the books of the transferee to record the takeover of business from the transferor company.
📗 1. For taking over Assets and Liabilities
| Entry No. | Particulars | Journal Entry |
|---|---|---|
| 1 | For assets taken over | Asset A/c (Individually) Dr. Â Â Â Â To Business Purchase A/c |
| 2 | For liabilities taken over | Business Purchase A/c Dr. Â Â Â Â To Liabilities A/c (Individually) |
📗 2. For purchase consideration discharged
| Entry No. | Particulars | Journal Entry |
|---|---|---|
| 3 | If consideration is discharged by issue of shares | Business Purchase A/c Dr. Â Â Â Â To Equity Share Capital A/c |
| 4 | If any consideration paid in cash | Business Purchase A/c Dr. Â Â Â Â To Bank A/c |
| 5 | If shares issued at premium | Business Purchase A/c Dr.     To Equity Share Capital A/c     To Securities Premium A/c |
📗 3. For incorporation expenses (if borne)
| Entry No. | Particulars | Journal Entry |
|---|---|---|
| 6 | For preliminary/incorporation expenses | Preliminary Expenses A/c Dr. Â Â Â Â To Bank A/c |
illustrative Flow of Ledger Accounts
In transferor’s books:
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Realisation A/c → Transfers & closes assets/liabilities
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Transferee Company A/c → Receives consideration
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Equity Shareholders A/c → Settles owners’ claims
In transferee’s books:
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Business Purchase A/c → Records net value acquired
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Assets and Liabilities → Debited/credited as per agreement
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Share Capital / Bank A/c → Settles purchase consideration
2 thoughts on “Ledger accounts in the books of Transferor and Incorporation Entries in books of Transferee Company”