B.COM PART 1 & 2














Only such students will be eligible for admission to the B.Com. Part-1 class who have
i) Intermediate in Commerce OR
ii) Higher Secondary with Commerce OR
iii) Intermediate Arts/Higher Secondary Arts Group with Economics OR
iv) Higher Secondary or Intermediate Arts/Science/Home Economics in at least Second
Division OR
v) Diploma in Commerce, Diploma of Business Administration, Diploma of Associate
Engineer of the Technical Education Board OR
vi) Intermediate Agriculture with Economics OR
vii) Intermediate Science with Mathematics.

Wednesday, February 15, 2017

B-COM PART 1: ENGLISH: Chapter 2 - Gentle Giants

Image result for ape


There are many misconceptions about the nature and life style of Gorillas. Gorillas are considered to be ferocious and and tenacious creatures, they are, in fact, gentle and tender.

It was due to some images of them in which they looked beastly that made people scared of them. An American explorer published a book about hunting of gorillas in the African jungle. He produced a photograph of an injured gorilla standing on the body of a hunter in a very aggressive style. Hollywood made a film "King Kong" in 1930 making as a terror to people.

Gorillas are not hostile to man. They are vegetarians, they do not attack on other animals. They look after their children with great care and are loving creatures. They only show their anger and fierce whey they are attacked or treated badly.

They also become hostile when they are kept separated in the cages from their families; they even attacked their keeper. The zoological gardens are now treating animals scientifically. They try to provide them the natural environment. The tribute therefore, goes to the zoos, which are taking cares of animals efficiently and affectionately. As a result the animals are behaving themselves. They are inoffensive and non-aggressive.

It is pity that the number gorillas is decreasing alarmingly due to the activities of man. Man is cutting forests where they live. Their number is now limited to a few thousand. man exults in killing them. The wilds life is on the verge of extinction as the natural abode of the animals is disappearing from the globe of the World.

To sum up, gorillas, which and rightly called the "Gentle Giant", are also endangered species like other wild life. We should do something for protecting wild life.

Difficult Words

Images ------------------------- pictures, mental pictures

Offspring ---------------------- child, young

Rip ---------------------------- tear

Ramp --------------------------- to play about energetically

Charge ------------------------- attack

Clamber ------------------------ to climb with difficulty

Spoiling ----------------------- showing great affection for

Enclosure ---------------------- place surrounded by a wall

Inoffensive animals ------------ animals that are harmless

Dies hard ---------------------- It is difficult to forget

Adored grand-children ---------- grand-children that are greatly loved

Questions and Answers

Q.1 What did make the bad reputation of gorillas according to the lesson "Gentle Giants"?

Ans. Some pictures in which the gorillas have been shown as wild creatures and in some movies they have been shown dangerous to men made the bad reputation o gorillas. In the book of an American explorer about hunting gorillas contained many pictures in which gorillas are in ferocious state.

Q.2 How do gorillas live in the thick forests of Africa?

Ans. Gorillas are almost vegetarian and spend their days eating leaves and juicy stems in the thick forest of Africa.

Q.3 Describe the nature and behaviour of gorillas according to lesson "Gentle Giants"?

Ans. Gorillas are not hostile to man and other animals unless they are attacked or treated badly. They also become hostile and fierce whey they are kept separated in the cages from their families.

Q.4 How do the gorillas bring up their children?

Ans. The gorillas love their children too much. They are vegetarians. They don't attack on other animals. They have kind nature and love specially children. They even try to play and show their mischievous behaviour.

Q.5 Why did the author David Attenborough want to tell us about gorillas and saying them "Gentle Giants"?

Ans. The author David Attenborough wanted to clear the misconceptions and tell the nature of gorillas so he called them "Gentle Giants". In this way the author is trying to convince the readers that the gorillas are big animals but they are not harmful to man and for other animals.

Q.6 What is the procedure that is being used to keep the animals in the zoological gardens?

Ans. Scientific methods and techniques are being used to keep the animals in zoological gardens, a natural environment is provided to keep the animals their survival. all the animals are treated with love and become non aggressive.

Q.7 What is future of gorillas according to the lesson "Gentle Giants"?

Ans. gorillas are becoming endangered in the wild life. No more than a few thousand low land gorillas like jumbo still survive. His slightly bigger, shaggier relatives, the mountain gorilla are now reduced to only few hundred. Man has destroyed the forests on which they depend. The hunting of gorillas becoming common therefore the future of gorilla is in danger.

B-COM PART 1: ENGLISH: Chapter 12 - Plan of Attack

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In a pleasant spring afternoon Ella MeCarthy sat on a green painted chair in Kensington looking passively around. She was waiting for her boyfriend. Bertie Heasant in whose absence the pleasant spring atmosphere seemed gloomy to her.

Her mood changed when Bertie came and the lover had a cordial and intimate talk. Ella thanked him for his present of the handkerchiefs, which he had sent to her but at the same time she seriously objected to the behaviour of Mrs. Heasant mother of Bertie who ws in the habit of opening all the private letters addressed to Bertie by his friends specially his girl friends. She thus posed as a big hurdle in the Ella-Bertie affair and Ella could not dare to write letters to Bertie and Bertie also was afraid to promote his pen friendship with Ella.

By chance Bertie discussed his problem by one of his sincere friend Clovis Sangrail. Clovic made a separate scheme to set right the matter of Bertie's mother undue interference in his personal affairs. One fine day he sent a set of cunning letters on the address of Bertie Heasant. The first letter was sent in a scented cover from an imaginary girl friend of Bertie namely Clotilde in which there was mentioned about jewels and Bertie was asked to be courageous to handle them. As usual on receipt of this letter, Mrs. Heasant opened that letter. Bertie ws not at home and when he came she made a great fuss on this letter and pestered Bertie by a large number of questions, scolding and threatening and made it difficult for him to breathe comfortably. He rushed into his room and closed it from inside.

After an hour another letter was received in the name of Bertie, which really proved to be a bomb blast in the House of Heasant, which has been opened by Mrs. Heasant. This letter had a mysterious message to the simpleton Bertie. The letter said:

"So you have really done it --- poor girl! Poor Dagmart you wicked boy, the servants all think that she killed herself and there will be best not to touch the jewels yet."

Apparently when Mrs. Heasant read the above letter she was almost became hysteric. For her the life of his son seemed to be at stake. She suspected the theft of jewels and murder of a girl Dagmart was committed by Bertie. She ran to the room of Bertie upstairs and started to beat at the door madly. "Miserable boy what have you done to Dagmart." She yelled and wept and scolded Bertie non-stop.

Bertie was also confused because he did not know as to who was the witch Clotilde who has haunted his life and was bent upon to destroy him and the entire House of Heasant.

In the evening a third letter arrived from Bertie's fast-friend Clovis Sangrail which solved all the mystery and he apologized for causing all the inconvenience by his first two letters disturbing and shaking the very foundation of Heasant who was in the habit of opening the private letters of Bertie.

By this time Mrs. Heasant was so much badly tortured mentally and psychologically perplexed that she virtually repented for her bad habit of opening the private letters of Bertie and creating scenes in the house.

Difficult Words

Inaudibly ---------------- which cannot be heard

Conscious ---------------- aware

Confess ------------------ admit some fault

Fetch -------------------- go and bring

Drag --------------------- to pull someone or something

Astonishing -------------- surprising

Improbable --------------- unlikely

Opportunity -------------- chance

Reference ---------------- hint

Eagerness ---------------- keenness

Existence ---------------- being; life

Anxiously ---------------- worried

Question And Answers

Q.1 Why did Ella McCarthy's dull afternoon suddenly brighten up?

Ans. Ella was sitting alone on a chair in Kensington Garden. There was no one to keep her company. That's why spring afternoon seems dull to her. The she say Bertie coming towards her. He was Ella's friend. On seeing Bertie, Ella's dull afternoon immediately turned bright.

Q.2 List three of Bertie's mother qualities. Give examples.

Ans. Bertie's mother's three qualities were maternal, interfering and inquisitive. She had a bad habit of opening others letters and reading them. Bertie's mother actually wanted to search for signs of youthful troubles and difficulties by reading her children's letters so that she could help them out. Reading others' letters however is basically regarded as interference in their private lives. Bertie and his sisters had quarreled with her about it a number of times but she did not care about it. When she received Clovis's letter to Bertie in the name of a girl, she became curious and started inquiring.

Q.3 What role did Clovis play in resolving Bertie's problem?

Ans. Clovis solved Bertie's problem by sending three thrilling letters in one day. In the first letter he wrote to Bertie to be brave enough to get the jewels under the false name of girl Clotilde. In the second letter, Bertie was congratulated on carrying out the act of killing the girl effectively and warning him not to touch the jewels yet but to wait for some time. The third letter clarified the whole situation so that person reading the private letters of others might stop doing so and it certainly happened. In this way Clovis was triumphant at his attempt attempt of helping Bertie.

Q.4 Who is most interesting character in this story?

Ans. I think Bertie is the most interesting character of this story. He is about twenty but he can't solve a simple domestic problem. He could not convince his mother not to read his private letters. He is sorry about it in front of his girl friend Ella and states the problem to his friend Clovis. Bertie is, however, lucky to have a friend like Clovis who helps him get rid of his problem.

Q.5 Why did Bertie's mother read all the letters that came to her home?

Ans. She thought it maternal to know each and everything about her children in order to same them from any trouble of youth. She might also be of inquisitive nature.

B-COM PART 1: ENGLISH: Chapter 13 - The Story of An Hour

Image result for the story of an hour book cover

Mrs. Mallard was a heart patient. The news of her husband's death might take her life so her sister Josephine told the news of her husband's death in broken sentence. A friend of her husband who brought the news of the death of her husband. Friend of her husband was also there which he had got from the office of newspaper.

When Mrs. Mallard heard the news of her husband she did not react unusually but she wept bitterly in the arms of her sister and after few moments she went to her room and closed the room's door and she sat on an armchair. First she felt the great intensity of his grief and felt loneliness then she realized that its the beauty of nature. She felt herself free from all tensions. She knew that she would look at the face of her dead husband who never loved her. She came to know that she would not live for anyone but for herself now.

Josephine came to the door and called her sister by name Louise and requested to open the door. But after ward she came down stairs clasping her at the waist of her sister where Richard was waiting. When they reached there someone suddenly open the door and came inside unconsciously. It was Mr. Mallard who had been away at the home of the railway accident this his life was saved. Richard tried to keep away Mr. Mallard from there but it was late, she had been died of heart attack.

Difficult Words

Elusive ----------------- difficult to point out

Veiled ------------------ hidden

(To) haunt -------------- to return to mind mind repeatedly

Unwittingly ------------- unintentional

Tumultuously ------------ violent

Afflicted --------------- suffered from

Hastened ---------------- made a hurry

Twitter ----------------- chirp, sing (of birds)

Slender ----------------- weak

Exhaustion -------------- tiredness

Revealed ---------------- let out, disclosed

Distant ----------------- remote

Question and Answers

Q.1 What was Mrs. Mallard's first reaction to the news of her husband's alleged death?

Ans. She wept at once, with sudden wild abandonment in her sister Josephine's arms. She rushed to her room and she stood facing the open window and sank into the armchair near the window. The weather was bit cloudy and the spring season had set it. She looked outside the window with empty eyes. She threw back her head upon the cushion of the chair, calm and repressed. She expected that something was coming to her and she was waiting for it.

Q.2 What was her later reaction?

Ans. She felt a sense of freedom from bondage, as she did not lead a happy married life. She thought of the days ahead when she would live for herself.

Q.3 What words did she use to express her later feelings?

Ans. She said over and over under her breath with slightly parted lips. "Free, Free!" She was staring and had a terrified facial expression. Meanwhile her pulse was beating fast.

Q.4 What is the surprise ending of the story?

Ans. Although she was very badly shocked to hear the news of death of her husband death and was feeling that her unbearable grief would end her life, but she survived. She thought about the agony of lonely, dreadful of many years as a widow. Then all of a sudden Brently Mallard arrived from his outside tour. He was not on a train which faced accident. On his appearance Louise was so much overjoyed that she died by an extreme shock of joy. So she was killed by the great joy and not by the shock of alleged of her husband's death.

Q.5 What is the central idea of this story?

Ans. Sometimes extreme grief does not cause death but extreme joy can kill a person. Death is certain irrespective of the fact whether it occurs by the shock of grief or by the thunderbolt of an extreme joy.

Q.6 What is your idea about the married life of Mr. and Mrs. Mallard after reading this story?

Ans. Mr. Mallard and his wife were not passing the happy life. Mr. Mallard not love his wife and she felt her alone and normally she had deep attraction to her husband.

Wednesday, February 8, 2017


A Partnership Firm May Be Dissolved Under the Following Circumstances

The remaining partners may purchase the share of the outgoing or deceased partner and continue the business under the same name; it involves only the dissolution of partnership. The dissolution of firm includes the dissolution of partnership too. The partners have a contractual relationship among themselves. When this relationship is terminated it is an end of the firm.
A firm may be dissolved under the following circumstances:
a) Dissolution by Agreement (Section 40):
A partnership firm can be dissolved by an agreement among all the partners. Section 40 of Indian Partnership Act, 1932 allows the dissolution of a partnership firm if all the partners agree to dissolve it. Partnership concern is created by agreement and similarly it can be dissolved by agreement. This type of dissolution is known as voluntary dissolution.
(b) Dissolution by Notice (Section 43):
If a partnership is at will, it can be dissolved by any partner giving a notice to other partners. The notice for dissolution must be in writing. The dissolution will be effective from the date of the notice, in case no date is mentioned in the notice, and then it will be dissolved from the date of receipt of notice. A notice once given cannot be withdrawn without the consent of all the partners.
(c) Compulsory Dissolution (Section 41):
A firm may be compulsorily dissolved under the following situations:
(i) Insolvency of Partners:
When all the partners of a firm are declared insolvent or all but one partner are insolvent, then the firm is compulsorily dissolved.
(ii) Illegal Business:
The activities of the firm may become illegal under the changed circumstances. If government enforces prohibition policy, then all the firms dealing in liquor will have to close down their business because it will be an unlawful activity under the new law. Similarly, a firm may be trading with the businessmen of another country. The trading will be lawful under present conditions.
After some time a war erupts between the two countries, it will become a trading with an alien enemy and further trading with the same parties will be illegal. Under new circumstances the firm will have to be dissolved. In case a firm carries on more than one type of business, then illegality of one work will not amount to dissolution of the firm. The firm can continue with the activities which are lawful.
(d) Contingent Dissolution (Section 42):
In case there is no agreement among partners regarding certain contingencies, partnership firm will be dissolved on the happening of any of the situations:
(i) Death of a Partner:
A partnership firm is dissolved on the death of any of the partner.
(ii) Expiry of the Term:
A partnership firm may be for a fixed period. On the expiry of that period, the firm will be dissolved.
(iii) Completion of Work:
A partnership concern may be formed to carry out a specified work. On the completion of that work the firm will be automatically dissolved. If a firm is formed to construct a road, then the moment the road is completed the firm will be dissolved.
(iv) Resignation by a Partner:
If a partner does not want to continue in the firm, his resignation from the concern will dissolve the partnership.
(e) Dissolution through Court (Section 44):
A partner can apply to the court for dissolution of the firm on any of these grounds:
(i)    Insanity of a Partner:
If a partner goes insane, the partnership firm can be dissolved on the petition of other partners. The firm is not automatically dissolved on the insanity of a partner. The court will act only on the petition of a partner who himself is not insane.
(ii)    Misconduct by the Partner:
When a partner is guilty of misconduct, the other partners can move the court for dissolution of the firm. The misconduct of a partner brings bad name to the firm and it adversely affects the reputation of the concern. The misconduct can be in business or otherwise. If a partner is jailed for committing a theft, it will also affect the good name of the firm though it has nothing to do with the business.
(iii) Incapacity of a Partner:
If a partner other than the suing partner becomes incapable of performing his duties, then partnership can be dissolved.
(iv) Breach of Agreement:
When a partner wilfully commits breach of agreement relating to business, it becomes a ground for getting the firm dissolved. Under such a situation it becomes difficult to carry on the business smoothly.
(v) Transfer of Share:
If a partner sells his share to a third party or transfers his share to another person permanently, other partners can move the court for dissolving the firm.
(vi) Regular Losses:
When the firm cannot be carried on profitably, then the firm can be dissolved. Though there may be losses in every type of business but if the firm is incurring losses continuously and it is not possible to run it profitably, then the court can order the dissolution of the firm.
(vii) Disputes among Partners:
Partnership firm is based on mutual faith. If partners do not trust each other, then it will not be possible to run the business. When the partners quarrel with each other, then the very basis of partnership is lost and it will be better to dissolve it.

Bull or Bear Market

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The terms “bull” and “bear” markets are often used to describe how stock markets are doing in general—whether they are appreciating or depreciating in value.

Bull Market

A bull market occurs when the economy is doing well—unemployment is low, GDP is high, and stocks are rising. If people are optimistic, believing that stocks will rise, they are called “bulls.”

Bear Market

On the other hand, a bear market is when the economy is NOT doing well— unemployment is high, and a recession is approaching. If people are pessimistic, believing that stocks are going to drop, they are called “bears.”

History of Bull and Bear Markets

Bull markets typically tend to last much longer and have much greater returns than bear markets. Because bear markets are so short and severe, it’s impossible to get out in time consistently. In many cases, by the time people realize they’re in a bear market and start to get nervous, they’re probably closer to the beginning of a bull market.

What to do?

In a bull market, investors should take advantage of rising prices by buying early and then selling later when the prices have reached their peak. During a bull market, investors can invest in more equity with a higher probability of making a return.
In a bear market, the chances of loss are greater because prices are continually losing value. Investors are better off short selling or making safer investments, such as fixed-income securities.

Fun Facts:

  • Bear and bull markets are named after how each animal attacks its prey. A bull usually drives its horns up into the air, while a bear swipes its paws downward upon its prey.
  • Bears and bulls were literally once fierce opponents when it was popular to put them into an arena to fight one another. Matches using bulls and bears (whether together or against other animals) took place in the Elizabethan era in London and were also a popular spectator sport in ancient Rome.
  • “Bulls make money, bears make money, pigs get slaughtered” is an old Wall Street saying that warns investors against excessive greed. Pigs are investors whose goal is to make the most amount of money in the shortest amount of time and are known to either take on high degrees of risk or overlook risk to make a profit.

Saturday, December 31, 2016

Accounting for acquisition of business


Business combination is the process under which two or more business organization or their net assets are brought under common control in a single business entity. Generally, companies doing similar types of business or involved in similar line of activities may go for business combination to get the economies of large scale production and to minimize the possibility of cut-throat competition. Business combinations result the growth. Other terms applied to business combinations are merger and acquisition. A "merger" refers to a situation where two or more than two companies of similar nature combine willingly while an "acquisition" or take over' refers to the situation where a  bigger company take over a smaller company. Business combination can take place either through amalgamation or through absorption.
Form of business combination
Amalgamation, absorption, reconstruction and holding company are the forms of business combination.

When two or more companies carrying or similar business go into liquidation and a new company is formed to take over their business, it is called amalgamation. In other words, amalgamation refers to the formation of a new company by taking over the business of two or more existing companies doing similar types of business. In amalgamation, two or more companies are liquidated and a new company is formed to take over business of liquidating companies. The companies which go into liquidation are called or amalgamating or transferal companies where as the new company which is formed to take over the business of liquidating companies is called purchasing or amalgamated or transferred company. The main aim of amalgamation is to minimize the possibility of cut- throat competition and to advantages of large scale production.

Features of Amalgamation

Following are the main features of amalgamation:
1.    Two or more existing companies are liquidated.
2.    A new company is formed to take over the business of liquidating companies.
3.    The nature of business of existing companies is similar.
4.    Liquidating companies are called vendor companies and the new companies is called purchasing company.
5.    Generally, purchase consideration is discharged by issued of equity shares of purchasing company.
Absorption is the process under which an existing large company purchases the business of another small company or companies doing similar business. In other words, when an existing company takes over the business of one or more existing companies carrying on similar business, it is called absorption. The company whose business is acquired is liquidating. But, no new company is formed. The company which take over the business is called absorbing or purchasing company and the company, the business of which is taken over is called absorbed or vendor company. The accounting record o absorption is similar to that of amalgamation.
Features of absorption
Following are the main features of absorption:
1.    One or more companies are liquidated.
2.    No new company is formed.
3.    The nature of business of both companies is similar.
4.    Generally, larger company purchases the business of similar company.
5.    The company which takes over the business of another company is called purchasing company and the company whose business is takes over is called Vendor Company.

Difference between amalgamation and absorption
Following are the difference between amalgamation and absorption:
Difference between amalgamation and absorption
When a company is suffering loss for past several years and suffering from financial differences, it may go for reconstruction. In other words, when a company's balance sheet exhibits huge accumulated losses, functions and intangible assets or is financial difficulties or is over capitalized and them the process of reconstruction is restored. Reconstruction may be internal and external.
1.    External reconstruction
When a company is suffering losses for the past several years and facing financial crisis, the company can sell its business to another newly formed company. Actually, the new company is formed to take over the assets and liabilities of the old company. This recess is called external reconstructions. In other words, external reconstruction refers to the sale of the business of existing company to another company formed. The liquidated company is called 'vendor Company' and the new company is called 'purchasing company'. The accounting procedure of external reconstruction is similar to that of amalgamation and absorption. For example, if an existing company (welcome 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.
2.    Internal Reconstruction
Internal reconstruction refers to the internal re-organization of the financial structure of a company. It is also termed as re-organization which permits the existing company to be continued. Generally, share capital is reduced to write off the past accumulated losses of the company. The accounting procedure if internal reconstruction is distinct from teat of the amalgamation, absorption and external reconstruction.
Holding company
The creation of the relationship of holding and subsidiary companies is a form of combination. A company may acquire either the whole or the majority of the shares of another company so as to have a controlling interest in such a company or companies. The controlling company is known as the holding company and the so controlled company or the company whose shares have been acquired is known as subsidiary company and both together are known as the Group of Companies. Holding companies are able to nominate the majority of the directors of subsidiary company. The company gets such right which it purchases more than half share of another company. So, the holding company is one which control on or more other companies either by means of holding more the half in that company or companies or by having power to appoint the whole or majority of the directors of those companies. A companies controlled by holding company is known as a subsidiary company.
Advantages of Business Combination
Amalgamation or absorption result the merging of two or more companies into one and form a business combination the main objective of business combination is to eliminate cut throat completion and secure the advantage of large scale production. Following are the advantages of business combination i.e. amalgamation and absorption:
1.    Competition between and among the companies is eliminated.
2.    Amount of capital can be increased by companies companies.
3.    Establishment and management cost can be secured.
4.    Benefits of large scale productions can be secured.
5.    Operating cost can be reduced by avoiding duplication.
6.    Research and development facilities are increased.
7.    Monopoly in the market can be achieved.
8.    Bulk purchase of materials t reduced price is possible.
9.    Stability in the price of goods is maintained.

Disadvantages of Business Combination

Following are the major disadvantages of any form of business combination:
1.    It brings monopoly in the market, which may be harmful for the society.
2.    The identity of the company finishes.
3.    Goodwill of the old company becomes difficult.
4.    Management of the company becomes difficult.
5.    Business combination may result in over-capitalization.

Accounting procedures of Amalgamation, Absorption and external Reconstruction

In amalgamation, absorption and external reconstruction, Vendor Company is liquidated by transferring its assets and liabilities as per agreement with the purchasing company. In exchanges, it wills receive purchase consideration from the purchasing company. Thus, Vendor Company and purchasing company are the two parties involved in the process of amalgamation, absorption & external reconstruction. The accounting procedures involve the following:
a.    Calculating of purchase consideration.
b.    Closing entries in the book of Vendor Company.
c.    Opening entries in the books of purchasing company.

Purchase consideration (purchase price)
The price paid by Purchase Company to Vendor Company for taking over the business is termed as purchase price or consideration. It is determined by the mutual between Vendor Company and purchasing company. The calculation of purchase consideration is one of the important tasks in the process of amalgamation, absorption and external reconstruction. Generally, purchase price is discharged by issuing fully paid shares of purchasing company. It is computer by the following methods.

1.    Lump sum method
When a fixed amount is paid by purchasing company on behalf of purchase of business to Vendor Company, it is known as lump sum payment of purchase consideration. No calculation is required to calculate purchase consideration under this method. For example, Nepal Company limited purchase the business of International institute and agrees to pay Rs 9, 00,000 here, the amount of purchase consideration is equal to Rs 9, 00,000.
2.    Net payment method
Under this method, purchase consideration is computer by adding the various modes of payment made by Purchasing Company in the form of cash, debentures, preferences shares and equity shares. In other words, the purchase consideration is the sum of all payments made by purchasing company in the form of cash, debentures and shares. Under this method, purchase consideration is calculated as under:
3.    Net assets method/ Net worth method
Here, net assets mean the difference between assets taken over and liabilities taken over. Under this method, the purchase consideration is determined by adding the agreed value of assets taken over and there after deducting the agreed value of liabilities taken over the purchasing company. Net assets method is used to determine the amount of purchasing consideration when the full details of purchase consideration as per net payment method are not given. Under this method, amount of purchase consideration is determined as under:

Point to be considered in respect of assets of Vendor Company
•    Fictions assets like preliminary expenses, discount on shares, underwriting commission, discount or cost on issue of debentures, debit balance of profit and loss account etc should not be included in assets taken over,
•    Intangible assets such as patent, trademark, copyright etc. should be included in assets taken over.
•    The word "all assets" include cash in and balance at bank also.
•    If any asset is not taken over by purchasing company that should not be considered for purchase consideration.
•    The word "business" will always mean assets and external liabilities.
•    While computing purchase consideration, current market price of assets should be considered.
Points to be considered in respect of liabilities of Vendor Company
•    Liabilities taken over means only external liabilities.
•    Trade liabilities include creditors, bills payable and account payable only.
•    Liabilities taken over do not include accumulated profit and reserve.
•    Any fund or reserve created out of salary of staff is trade red as external liabilities.

4.    Intrinsic value of shares method
Under, this method, purchase consideration is calculated on the basis of intrinsic value of share of the two companies involved. Intrinsic value of share is calculated by dividing the net assets available for equity shareholders by existing number of equity shares. This value determines the ratio of exchange of the shares between the purchasing company and Vendor Company.

Intrinsic value per share= net assets/ no. of equity shares

Closing entries in the books of Vendor Company
The accounting books and balance sheet of Vendor Company are required to be closed after getting the process of liquidation. A liquidator is appointed on the liquidation of the company and he represents the vendor company with purchasing company. When the company goes for liquidation a realization account. Is operated for settlement of accounts. For following entries and passed to close the books of vendor company.
1.    For liabilities taken over by purchasing company
2.    For liabilities taken over by purchasing company.
3.    For sale of assets not taken over by purchasing company.
4.    For purchase consideration due from purchasing company.
5.    For receipt of purchase consideration
6.    For payment of external liabilities not taken over by purchasing company
7.    For amount due to debentures holder
8.    For amount due to debentures holders discharged
9.    For amount due to preference shareholders
10.    For amount due to preference shareholders discharged
11.    For transfer of share capital and accumulated profit and reserve to equity shareholder 
12.    For transfer factious fictitious assets to equity shareholder
13.    For transfer of gain on realization to equity shareholders'
14.    For amount due to equity shareholders discharged

Opening entries in the books of purchasing company
The purchasing company records the transactions by passing opening journal entries and preparing opening balance sheet in the case of amalgamation and absorption. The following are the accounting records maintain in the books of purchasing company.
1.    When business of vendor company purchased.
2.    When assets and liabilities are purchase or taken over at an agreed market value.
3.    When purchase price is discharged or paid off in cash or by issuing shares and debentures at a par, at a premium or at a discount.
4.    When liquidation expenses are paid by purchasing company
5.    When goodwill written off (if there is shared premium)
6.    When there is formation expense or preliminary expense.
7.    When fresh shares are issued to the public
Internal reconstruction
It is process of making financial strength sound internally by charging him financial elements. Under this case, the share capital and liabilities are required to be altered in a planned way. Internal reconstruction is also termed as re-organization which permits the exiting company to be continued.
Method of internal reconstruction
Internal reconstruction is the process of re-arranging he share capital and liabilities. It includes the following two methods:
1.    Reduction of share capital
2.    Alternation or re-arrangement of share capital

1.    Reduction of share capital
Capital reduction is the way of decreasing difference classes of share capital, as a result of large accumulated losses or an excess of funds without profitable use. Ordinary, reduction in capital is made to write of heavy accumulated loss, fictitious assets and intangible assets. Similarly, if the company has been suffering losses for the last many years and is required to bring profit earning position in future by eliminating loss balance, the capital is reduced.
Accounting records for reduction of share capital
1.    When paid-up share capital is reduced with reducing the liabilities on shares
2.    When there is any increase or profit on revaluation (appreciation) of fixed assets.
3.    When any liability is reduced.
4.    When balance of any reserve or fund transaction to capital reduction account.
5.    When functions assets, intangible assets and other assets are written off out of the balance of capital reduction.
6.    When reconstruction expenses is paid out of the balance of capital reduction.
7.    When balance of capital reduction is transferred to capital reserve.

2.    Re-arrangement of share capital
Re-arrangement of share capital of a company is another way of internal re-construction. This can be applied by many methods. The process of re-arrangement of share capital is known as alteration of share capital also. A company may, if so authorized by its articles, go for the following scheme for alternative in share capital:
a.    Increasing share capital be fresh issue of shares
b.    Consolidating or dividing share capital into shares of large amount than its existing shares or smaller amount.
c.    Converting fully paid up share capital into share stock.
d.    Subdividing its shares into share of smaller amount f par value by increasing number of shares.

Accounting records for alternation of share capital
a.    When old share capital is sub-divided into share
b.    When old share capital is consolidated into shares of large par value.
c.    When fresh are issued for cash.
d.    When shares of fully paid up are converted into share stock.

Define the term amalgamation with its features.
When two or more companies carrying on similar business go into liquidation and a new company is formed to take over their business. It is called amalgamation. The companies which go into liquidation are called vendor company or amalgamating or transfer companies where as the new company which is formed to take over the business of liquidation companies is called purchasing or amalgamate or transference company. The main aim of amalgamation is to minimize the possibility of cut threat competition and to secure the advantage of large scale production
Feature of amalgamation
Following are the main features of amalgamation:
1.    Two or more existing companies are liquidated.
2.    A new company is formed to take over the business of liquidating companies.
3.    The nature of business of existing companies is similar.
4.    Liquidating companies are called vendor companies and the new companies is called purchasing company.
5.    Generally, purchase consideration is discharged by issued of equity shares of purchasing company.


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