In this article we will discuss about the accounting treatment for profit or loss prior to incorporation of a company. Sometimes, a company is formed for purchasing certain running or going concern. A company comes into existence only after its registration i.e., its incorporation. A company can earn profits only after its incorporation, but not before its incorporation. In many [...]
In this article we will discuss about the accounting treatments for payment of purchase price in relation to acquisition of business, explained with the help of suitable illustrations. (A) New Set of Books are Opened: The following are the entries recorded by the purchasing company: First Method: Note: (a) If the purchase price exceeds the net assets, the excess amount [...]
In this article we will discuss about the accounting treatment for disposal of capital reduction account, explained with the help of a suitable illustration. The Capital Reduction Account is a temporary account opened in order to carry out the internal reconstruction. When the scheme is carried out, the account is closed. The Capital Reduction Account represents the sacrifice made by [...]