CORPORATE ACCOUNTING | UNIT-2 AMALGAMATION (AS-14) PROBLEMATIC EXPLAINATION (2) ‎⁨@shivanipallela

Added: 2026-05-12

[00:00:00]Hello students, welcome back to our channel. So here in this video we are going to discuss the corporate accounting subject unit number two amalgamation second topic, okay? So in previous video we have discussed the first problematic concept in unit number two in corporate accounting. Now we are discussing unit number two second topic problematic, okay? So previously we have already discussed amalgamation in the nature of merger. Now in this video we are doing the amalgamation in the nature of purchase. So I request you to watch the first problematic topic, then only you will understand second problematic topic in unit number two. Directly if you are watching second topic means you will not understand anything. Clear?

[00:00:48]After watching first problematic explanation, then only watch this this video, ma, okay? So today now in this video we are discussing amalgamation in the nature of purchase, okay?

[00:01:00]Simple thing, what is the question is that See here the question.

[00:01:07]X Limited and Y Limited decided to amalgamate and a new company by name X and Y Limited is formed to take over the both the companies as on 31st March 2018. See X and Y company both are merged together and formed a new company. What is the company name? XY Limited, okay?

[00:01:32]What is the balance sheet they have given? They have given liabilities of X and Y Limited, assets of X and Y Limited. Total balance sheet they have given. Now show how the amount payable to each company is arrived at and prepare amalgamate balance sheet of XY Limited assuming amalgamation is done in the nature of purchase. They have mentioned no in the nature of purchase and the nature of merger, and you basically. So, here they are clearly mentioning in the nature of purchase. That is second topic. So, they are asking journal entries.

[00:02:08]They are asking balance sheet, also. So, before writing journal entries, first we will do the balance sheet. Okay? First, we will do the balance sheet, then only we will able to do the journal entries.

[00:02:21]Okay? So, what is the balance sheet pro forma? Same like first one only. Okay?

[00:02:26]What is the first thing you will have in the balance sheet, ma? Equity and liabilities, no? See here, I'm keeping equity and liabilities.

[00:02:39]In equity and liabilities, what is the first one you will have? First one you will have shareholders' fund. Yes or no?

[00:02:48]Shareholders' funds. In shareholders' funds, you will have share capital.

[00:02:59]Second one is reserves and surplus.

[00:03:05]These two you will have. Yes or no? Same like merger only, only two to three changes it will be there. Okay? So, what we will do in share capital, ma? Share capital, we will write the purchase consideration, no? So, purchase consideration of X Limited, purchase consideration of Y Limited, both we will do, and we will add it, and we will put it here in the share capital. Same like merger only, only two difference only will be there. So, first we need to do the calculation of purchase consideration of X Limited. What is the purchase consideration of X Limited?

[00:03:40]Like how we will do? Assets minus liabilities. So, total assets minus liabilities, no? So, first we need to understand what is there in the assets of X Limited. So, here I'm writing assets. What is the assets we are having, ma'am?

[00:03:55]Goodwill is there. How much is the X goodwill? 10. Next, land. Next, plant.

[00:04:01]Next, patents. Nothing is there. Stock, 20. Debtors, 10. Cash, 5. So, total you need to add it. Okay, see here I'm writing.

[00:04:10]First, you're having goodwill, no? So, goodwill.

[00:04:14]How much is the goodwill? 10.

[00:04:18]Inner column I'm writing for the calculation. Next, land is 25.

[00:04:23]Next, plant is 20.

[00:04:26]Next, stock you're having. Patents is zero, so that's why I'm not writing. So, patents is also 20.

[00:04:33]Debtors is 10.

[00:04:37]Cash you're having. Bills receivable, nothing is there. So, cash is 5. So, total assets of X Limited is So, how you will do? So, 10 + 25 + 20 + 20 like that. So, that 10 + 25 35. 20 20 40 50 55. So, 55. So, total is 90. So, total assets of X Limited is 90. From that, what we need to do? We need to deduct the liabilities. So, what is the liabilities we are having, ma'am, in the purchase consideration? You should not take capital. You should not take reserve fund. You should not take profit and loss account. You should not take any kind of fund also. Only we will take the current liabilities. What is the current liabilities we are having? Bank overdraft, creditors, and bills payable.

[00:05:22]Okay? So, bank overdraft of X Limited is nothing we are having. So, that's why we are not taking. So, bank overdraft is nil.

[00:05:30]So, here I'm writing.

[00:05:31]Bank overdraft is nil. Next, what you're having? Creditors. Okay?

[00:05:37]Creditors is 10. So, bills payable.

[00:05:41]Bills payable you're having 5. So, total How much it is? Total current liabilities is 15. So, 10 + 5 is 15, no?

[00:05:50]So, what is the purchase consideration?

[00:05:52]That means 90 minus 15. How much it will be? 75.

[00:05:58]Okay, like this you need to do the purchase consideration of X Limited.

[00:06:02]Now, after doing the X Limited, same way purchase consideration of Y Limited. So, same thing. Assets minus liabilities.

[00:06:10]So, what is assets you are having?

[00:06:14]Goodwill eight.

[00:06:20]Goodwill eight.

[00:06:22]Land is 19.

[00:06:27]Plant is 25.

[00:06:30]Plant is 25. Yes? Patents is five.

[00:06:38]Stock is 15.

[00:06:42]Stock is 15. Debtors is five.

[00:06:50]Bills receivable is two. Cash is one.

[00:06:53]Yes?

[00:06:54]All assets. Bills receivable is two.

[00:06:57]Cash is one. So, total you need to do the assets. So, 8 + 19 + 25 + 5 + 15.

[00:07:07]Sorry.

[00:07:08]8 + 19 + 25 + 5 is 30. 15 + 5 is 20.

[00:07:16]2 + 1 is 3. So, total is 80. So, total assets is 80. From that, what we need to do? We need to do the minus liabilities.

[00:07:26]So, what is the liabilities we are having, ma?

[00:07:29]Bank overdraft is five. Creditors is 12.

[00:07:31]Bills payable is three. Yes or no? So, here I'm writing bank overdraft is five.

[00:07:41]Creditors is 12.

[00:07:45]Bills payable is three.

[00:07:49]So, 12 + 3 is 15. 15 + 5 is 20. So, how you will do the purchase consideration? 80 minus 20. 80 minus 20 is 60. So, purchase consideration of Y Limited is 60. So, we have calculated purchase consideration of X Limited, purchase consideration of Y Limited. So, after getting the purchase consideration only we will write it in the share capital, no? What is the purchase consideration of X? 75. What is the purchase consideration of Y? 60. That means see here, 75 plus 60 we need to do it.

[00:08:26]Okay? So, what is 75 plus 60?

[00:08:29]75 plus 60 is 135.

[00:08:33]So, 135 is the share capital. That's it.

[00:08:37]Okay? Next what you are having? And one more thing remember, we are doing in the nature of purchase. Okay? When you are doing in the nature of purchase, we should not take any kind of reserves. We should not take any kind of profit and loss account. We should not take any kind of fund. Okay? Nothing we should not take anything. That means here in reserves and surplus, though in the question you are having reserve fund, P&L account, dividend fund, workmen compensation fund, you should not consider in the solution. Simply we need to ignore when you are doing in the nature of purchase. In the merger we need to take it. Okay? But in purchase you should not take it. That is reserves and surplus. Always it will be nil.

[00:09:25]Okay? After shareholders fund, what is the second one you will have, ma'am?

[00:09:29]Current liabilities. Yes or no? So, current liabilities.

[00:09:36]So, current liabilities, what is the current liabilities we are having? Bank overdraft. So, bank overdraft you are having. Yes, simply we will add it. So, how much is bank overdraft? Five. So, directly here I'm giving five. Next, what you are having? Creditors and bills payable. Creditors and bills payable together we will get we will write it in the trade payable, no? So, here I'm writing trade payable. In trade payable we are adding creditors and bills payable. So, 10 + 5 is 15, 12 + 3 is 15. So, 15 + 15 is 30.

[00:10:11]So, 15 + 15 is 30. So, that's it. So, share capital, purchase consideration we have taken. We should not take any kind of fund. We have taken bank overdraft, creditors and bills payable. So, liabilities is over. That means total liabilities is over. So, total of liabilities is 135 + 5 is 140. 140 + 30 is 170. So, total liabilities is 170. Now, next one coming back to the assets side.

[00:10:39]So, second one what you'll have, assets.

[00:10:41]In assets, what you'll have first one?

[00:10:43]Non-current assets. Yes or no? Pro forma you're having, remembered or not?

[00:10:48]Non-current assets. In non-current assets again you'll have fixed assets.

[00:10:55]Okay. Here you'll have again fixed assets. What is the fixed assets we are having? Simply we need to add every asset. Okay?

[00:11:07]See, here I'm doing the working notes for fixed assets.

[00:11:15]What is the fixed asset? Goodwill is a fixed asset, land, plant, patents. This four are the fixed assets, yes or no?

[00:11:23]Simply I'm adding that. So, goodwill 10 + 8 is equal to 18. Next land 25 plus nine.

[00:11:36]25 plus 19 So, what is 25 plus 19? 25 plus 19 is 44.

[00:11:46]Okay. Next what you're having? Plant 20 plus 25, that is 45.

[00:11:52]So, plant is 20 plus 25, that is 45. Okay. Next you're having patent, so only five you're having. So, patents is five. So, total fixed assets 45 plus five is 50. 50 plus 44 is 94. 94 plus 18 is 112.

[00:12:15]So, total fixed assets is 112.

[00:12:19]So, like this you need to do the working notes. Here we are doing working notes number one, 112. Because we have done the working notes, no, you need to show it here in the table. Okay. For this we have done the working notes. Next what you're having, ma? So, fixed assets is over. Stock will comes here in the inventories only, no? That will comes in the current assets.

[00:12:40]Current assets. In current assets what you're having?

[00:12:44]Inventories Okay. What is inventories? 20 plus 15.

[00:12:50]You need to show it in the working notes.

[00:12:53]So, second one inventories What is inventories you're having?

[00:13:01]Inventories is nothing about stock, no?

[00:13:03]So, 20 plus 15. So, 20 plus 15 is nothing about 35. Clear?

[00:13:10]So, here I'm writing working notes number two, 35.

[00:13:14]Okay. Next what you're having? Debtors and bills receivable. Debtors and bills receivable together we'll cut it in the trade receivable, no? So, trade receivable working notes number three. What you will write it here?

[00:13:29]So, we are doing for trade receivable.

[00:13:34]In trade receivable, what will come?

[00:13:37]Debtors and bills receivable. So, what is the debtors now? 10 + 5. Bills receivable is two.

[00:13:46]So, 10 + 5 is 15.

[00:13:49]0 + 2 is 2. So, 15 + 2 is 17. Okay?

[00:13:56]So, here in trade receivable, I'm doing 17. Okay, next last one what you are having? Cash. Cash will come here in the cash and cash equivalents. That means see cash and cash equivalents. That is working notes number four.

[00:14:10]So, here I'm writing working notes number four.

[00:14:15]Cash and cash equivalents.

[00:14:22]So, what is the cash balance?

[00:14:25]5 + 1.

[00:14:27]So, 5 + 1 is nothing about six.

[00:14:32]Simply I'm writing here six.

[00:14:34]Just do the total. Everything is over in the question. Okay? So, 112 112 + 35 + 17 + 6. So, it is 170. So, like this it should get tallied. Assets is 170. Liabilities is 170. Here, what is the difference between merger and purchase? We are not taking any kind of reserves and surplus. Even though you are having general fund, reserve fund, premium account, everything if you are having also, you should not take that. Okay?

[00:15:12]That is the difference you are having.

[00:15:13]So, solution is over, no? Now, we will write the journal entries for XY Limited.

[00:15:19]Okay? How you will write the journal entries? What is the year they have given 2018?

[00:15:24]So here I am writing 2018.

[00:15:27]Okay. What is the date we are having?

[00:15:30]March.

[00:15:32]Okay, March. Okay, so like this we are having. So what is the first thing we need to do it means business is purchasing.

[00:15:41]Means X is taking amalgamating with purchasing. X is taking with Y. So first transaction will be business purchase account data.

[00:15:55]Okay, two X Limited two Y Limited. So what is the purchase consideration of X and Y? 75 and 60.

[00:16:07]So here I'm writing in the credit side.

[00:16:09]X is giving 75 and Y is giving 60. So 75 + 60 in the debit side it will become 135.

[00:16:18]Here in the bracket what you will write it? B B purchase consideration due to liquidator of X and Y Limited. That's it.

[00:16:42]Okay, purchase consideration. This is the first [laughter] transaction. After every transaction you need to write the You need to draw a line.

[00:16:50]After that, what we are having? We have done the purchase consideration.

[00:16:55]So purchase consideration of X, purchase consideration of Y. For this we need to write the journal entries. First we will write for this one. How you will write?

[00:17:04]In debit side what you are having?

[00:17:05]Goodwill everything you are having. In credit side you are having this one.

[00:17:10]Yes or no? So how you will write this one means simply see. So goodwill goodwill data Next Land account data all will come here in the debit side only no plant account data Goodwill land plant next stock account data Next data's account data Next cash account data Okay so what is the values you are having 10 25 20 sorry 10 25 20 20 10 and 5 you are having no so that I'm writing in the 10 25 20 20 10 and 5 Yes So where we are crediting to creditors So what is the creditors 10 here I'm writing in the 10 in the credit balance okay so two next what you are having bills payable so two bills payable it is five next remaining balance will go to the business purchase no so business purchase account so that means 10 simple see here So if you deduct this value means what is the remaining left over value 75 no that will go to the business purchase account that means in the credit side you need to write 75 so here total if you are doing means 90 here total if you are doing means 90 Okay what do you write the narration bracket open being assets and liabilities taken over by X Limited this is the second journal entry you need to do it And what is the third journal entry purchase consideration of Y Limited what are having land, goodwill, plant, everything, no? So, this is third one. Same again, goodwill account data.

[00:19:23]Next, land account data.

[00:19:27]Next, plant account data.

[00:19:31]Goodwill land land, patents, stock, debtors.

[00:19:35]Next, patents account data.

[00:19:40]Stock account data.

[00:19:45]Debtors, bills receivable, cash, no?

[00:19:48]Next, debtors account data.

[00:19:55]Bills receivable.

[00:19:57]Bills receivable account data.

[00:20:01]Cash account data.

[00:20:04]To For where we are transferring?

[00:20:07]Bank overdraft, creditors, and bills payable.

[00:20:10]Simple thing.

[00:20:11]To bank overdraft account. To bills payable account. To creditors. Remaining will we will going to the to business purchase account. Okay? So, how what is the values? 8 19 25.

[00:20:30]8 19 25. Here in the debit column only I'm writing, ma.

[00:20:35]5 15 5.

[00:20:37]5 15 5.

[00:20:41]2 and 1.

[00:20:43]So, 2 1. What is the bank overdraft?

[00:20:46]Bank overdraft is 5.

[00:20:50]In the credit side, 5.

[00:20:52]Okay? Next, creditors is 12.

[00:20:55]Creditors is 12.

[00:20:57]Bills payable is 3. Bills payable is 3.

[00:21:01]What is the remaining purchase consideration? 60.

[00:21:04]So, it is 60. So, if you add all this means you will get the value of 80. If you add all this means you'll get 80.

[00:21:13]That's it. What will be writing in the bracket? Being assets and liabilities are of Y Limited taken over. That's it.

[00:21:34]Clear? So, only three general entries we will write it, ma. One is for the business purchase, okay? Second one is the purchase consideration of uh first company. And third general entry will be purchase consideration of second company. So, here I have discussed in the nature of business general entries, purchase consideration, working notes.

[00:21:55]Here also purchase consideration of Y Limited, then balance sheet. This is the working notes. Like this you need to do the solution in the examination.

[00:22:04]Clear? Understood? Okay, this is easy answer, simple answer, simple to understand also. Now, I'll give you I will explain another question also for better understanding, okay? Now, for better understanding, ma, see this question.

[00:22:20]Ever Limited Ever Limited and Green Limited agreed to amalgamate. That is Evergreen Limited was incorporated. So, Ever Limited and Green Limited agreed and they have amalgamated and they have formed Evergreen Limited. You need to show take over the balance sheet. You need to show the balance sheet. You need to show the amalgamation. So, before doing the balance sheet, before doing the balance sheet, what is the balance sheet pro forma we will write it, ma? Again, we need to write the balance sheet pro forma. First one, equity and liabilities, no? So, equity and liabilities. In equity and liabilities, what is the first one you will have?

[00:23:03]Shareholders fund. Same same previous only. So, understand the concept. So, shareholders fund. In shareholders fund, so what you will have? Share capital you will have.

[00:23:18]Second one you will have reserves and surplus. But one thing when you are doing in the nature of purchase, you will not have any reserves and surplus. Even though you are having profit and loss account, even though you are having reserve fund, we should not take any reserve fund. To do the share capital, what we will do? We need to do the purchase consideration of Ever Com company and we need to do the purchase consideration of Green Limited company.

[00:23:44]How you will do the like a calculation?

[00:23:47]Assets minus liabilities, no?

[00:23:50]First we need to do the purchase consideration. So, assets minus liabilities. What is the total assets we are having in the Ever Limited? What is the total assets we are having in the Ever Limited, ma'am? So, land we are having. Yes, just put it out here. So, land is 1 lakh. Okay. Next, plant you are having 40,000.

[00:24:15]Goodwill you are having 30,000.

[00:24:20]Stock you are having again 30,000.

[00:24:25]Data's you are having 20,000.

[00:24:31]Cash you are having 10,000. Now you need to add total assets. So, 1 lakh plus 40,000 is 1 lakh 40,000. 1 lakh 40 plus 30 is 1 lakh 50 60 1 lakh 70,000. So, 1 lakh 70,000 plus 30,000 20,000 50 60 plus 60,000. How much it will be? 2 lakhs 30,000. So, total assets is 2 lakhs 30,000. From that 2 lakhs 30,000, we need to deduct the liabilities. What is the liabilities we will take it in the purchase consideration, ma? We will not take share capital, we will not take P&L account, we will not take any results, but we will take creditors, bills payable, bank overdraft, no? But here in the question we are having only creditors. So, only creditors we need to do the deduction. So, creditors of Ever Limited is 16,000. So, we need to deduct the 16,000 from the total assets. So, 2 lakh 30,000 minus 16,000 if you are doing means Sorry. 2 lakh 30,000 minus 16,000 if you are doing means you are getting the value of 2 lakh 14,000. So, this 2 lakh 14,000 is called as purchase consideration of Ever Limited. Next same like that only, purchase consideration of Green Limited also we need to do it.

[00:25:43]So, first you will take the assets. So, what is the assets we are having, ma?

[00:25:47]Again same.

[00:25:48]Land 60,000.

[00:25:51]Land you are having 60,000.

[00:25:54]Plant you are having 30,000.

[00:26:01]Goodwill you are having 10,000.

[00:26:05]Stock you are having again 10,000.

[00:26:10]Debtors you are having 5,000.

[00:26:14]Cash you are having 5,000. Okay, so total assets we need to do it. So, 60 plus 30 is 90, 90 plus 10 is 1 lakh, 1 lakh 10,000, 1 lakh 10,000 plus 10,000 is 1 lakh 20,000. So, 1 lakh 20,000 is the total assets. From total assets we need to deduct the liabilities.

[00:26:34]So, what is the liabilities we are having? Only creditors we are having.

[00:26:37]So, what is the creditors value of Green Limited, ma? 10,000. So, 1 [snorts] lakh 20,000 minus 10,000 is 1 lakh 10,000.

[00:26:46]That's it.

[00:26:48]So, what is the purchase consideration of Green Limited? 1 lakh 10,000. So, when you add this both, you will get the share capital, that is 2 lakh 14,000 plus 1 lakh 10,000. See here I'm writing.

[00:27:04]2 lakh 14,000 plus 1 lakh 10,000. How much it will be? 3 lakh 24,000. So, in the share capital I'm writing 3 lakh 24,000.

[00:27:15]Okay. Next in the second one you have you are having current liabilities. In current liabilities we will not take any share capital, we will not take any P&L account. Only we are having creditors.

[00:27:26]Creditors is 16,000 plus 10,000. So, total 26,000, no? So, current liabilities. So, current liabilities we are having creditors. So, in creditors 16,000 plus 10,000. So, 16,000 plus 10,000 is 26,000. Over. Every liability is over.

[00:27:51]So, 26,000 plus 3 lakh 24,000 is 3 lakh 50,000 is the total liabilities.

[00:27:59]So, total liabilities is 3 lakh 50,000. Okay. Now, in the same way we need to do the assets also. Yes or no?

[00:28:10]So, assets.

[00:28:12]In assets first one you will have non-current assets.

[00:28:20]In non-current assets first one you will have fixed assets. So, what is the fixed assets you need to add everything? Okay.

[00:28:26]That is land, plant, goodwill is the fixed assets, no? You need to add all things. So, 1 lakh plus 60,000 is 1 lakh 60,000. So, here I'm writing 1 lakh 60,000 plus 40,000 plus 30,000 is 40 plus 30 is 50, 60, 70, 80,000. So, plus 80,000. So, goodwill also 30,000 plus 10,000 is 40,000. So, total fixed assets is 2 lakhs 80,000. That's it. So, 2 lakhs 80,000 is the total fixed assets. So, 1 lakh 60 plus 40 50 60 70 then 40. Okay?

[00:29:02]So, total 1 lakh 60,000 plus 70,000 plus 40,000.

[00:29:09]So, 2 lakhs 70,000 it will be. So, fixed assets is 2 lakhs 70,000.

[00:29:15]Okay? If you want to show the adjustment, you can show the working notes also. So, next you're having stock. Stock is nothing about inventories. So, inventories will come here in the current assets, no? So, here I'm writing current assets. You're having inventories.

[00:29:34]A1 is inventories. That is 30,000 plus 10,000.

[00:29:38]So, 30,000 plus 10,000 is nothing about 40,000.

[00:29:45]Okay? Next you're having debtors.

[00:29:47]Debtors will come here in the trade receivables, no? So, trade receivable.

[00:29:55]What you're having? 20,000 plus 5,000.

[00:29:59]So, 20,000 plus 5,000 is 25,000.

[00:30:05]Next C1.

[00:30:07]Cash you're having 10,000 plus 5,000.

[00:30:10]So, cash here I'm writing 10,000 plus 5,000. It will be 15,000. Okay?

[00:30:18]Everything we have taken. Everything is over. Just do the total.

[00:30:24]Total assets, that is 2 lakhs 70,000 plus 40,000 plus 25,000 plus 15,000. How much it will be?

[00:30:33]3 lakhs 50,000.

[00:30:36]That's it.

[00:30:37]3 lakh 50 3 lakh 50. Okay? But, what is the difference between in the nature of merger and in the nature of purchase? In merger we will take reserves and surplus. In purchase we will not take any reserves and reserves and surplus. Okay, that is the only difference. Remaining everything is same. But here in a purchase we have learned the journal entries. How to write the journal entries also we have learned. If they are asking to write the journal entries like this you need to write it. Clear? So this is the in the nature of purchase answer. Clear? I hope you have understood. I'm giving the question marks. See, take a screenshot of the notes. Anyway, these notes will be available. So this is the homework problem in the nature of purchase. See, they have mentioned assuming amalgamation is done in the nature of purchase. They will mention in the question whether it is nature of merger or whether it is nature of purchase.

[00:31:31]Do this question and tell me your final answer in the comment section. How much it is? How much is the total liabilities and total assets should get tallied, no?

[00:31:42]So that is the second topic in unit number two. Let me know in the comment section whether the explanation is understanding or not. Previously I have already uploaded unit number one, ma.

[00:31:52]This is completely unit number two. So in upcoming videos third unit, fourth unit, fifth unit also definitely I'll explain, okay? So this is all about the video. If you are having any doubts, let me know in the comment section. See you all in next video, students. Bye-bye, everyone.