Journal entries in the books of Transferor Company ( Before & After Amalgamation )

Before Merger:

• For Revaluation of Investments in Equity shares of Transferor co held by Transferee co, if any:

• If appreciated:
Investment A/c Dr
To General Reserve a/c.
Otherwise reverse.

• For declaration of dividend by transferee company just before merger:

P/L a/c Dr
To Dividends payable a/c

Entries for affecting Amalgamation:
• For Purchase consideration payable:
Business Purchase a/c Dr
To Liquidator of Transferor Co a/c

• For Taking over various assets and Liabilities:

In case of Merger:
Assets a/c Dr (Book Value)
To Liabilities (Book Value)
To Reserves
To Investments (if any)
To Business Purchase

In case of Purchase:
Assets a/c Dr(Agreed Value)
To Liabilities -do-
To Investments (if any)
To Business purchase
(Any difference in above entry shall be Goodwill(Dr)/Capital Reserve(Cr))

• For Discharge of Consideration:

Liquidator of transferor co Dr
To ESC
To PSC
To Debentures (if any)
To Bank
To Securities Premium

Entries after Amalgamation: 
• For Adjusting unrealized profits on goods transfer:
P/L / Goodwill or Capital Reserve Dr
To Stock in Trade

• For Adjusting inter co Owings/mutual indebt ness:
Creditors/B/P/Loan Dr
To Debtors/B/R/Loan

•For Cancellation of Dividend:
Proposed Dividend Dr (Proposed dividend cancellation)
To P/L

or

Dividends Payable Dr (Adjustment of dividends declared)
To Dividends Receivable


• Adjustments for conformity uniform accounting policies shall be done. It may be anything like for eg. Investment may be quoted at MV in one company and at cost in other or change in depreciation rates of two companies. It may not be given in the problem we have to look at balance sheet and then decide.


• For discharge of debentures of Transferor co:
Debentures Dr(Transferor co)
To Debentures (Transferee co)

• The difference if any shall be accounted to reserve in case of amalgamation in the nature of merger, goodwill/capital reserve in nature of purchase.

• For expenses of amalgamation paid by transferee company:
Reserves/GW/CR Dr
To Cash/Bank