Amalgamation of companies
Ill 9(ICAI study material) Adjustment 4 Why they do for this journal enry?
Mutual owing are cancelled as P Ltd and Q Ltd are amalgamating into 1 company. The liquidation expenses of P Ltd paid by Q Ltd is over and above the consideration payable to Q Ltd. It is treated as Goodwill. As we have capital reserve balance, it is adjusted with Goodwill, to get the net effect of amalgamation.