No adjustment in book values is to be made except to ensure uniformity of accounting policies.

Thus there is a genuine pulling of combining of assets and liabilities of these units. (3) Lump sum method: (1) Net Assets method: Under the net asset method, the amount of a consideration is ascertained by taking over the revalued figures of assets and by reducing the liabilities taken over at their agreed values. The term asset will include all assets except fictitious assets or any particular asset not taken over by the transferee company. In case of intangible assets, they should be included unless otherwise stated. Whereas the term liabilities will mean all liabilities to third parties which have been taken over and shall not include any reserves as these are payable to the share holders but if a reserve fund denotes liability to the third party, the same must be included in liabilities. The examples of these kind of funds are Provident Fund, Workmen compensation fund and workmen profit sharing fund, etc. And these are to be included up to the amount of claim if any.

( AS 2,6,20,22 will definitely come in Examz ) Is to be considered under this method. 25/07/2011 (1) Realisation Account: (2) Equity Share Holders A/C: (3) Preference Share Holders A/C: (4) Cash/Bank A/C: (5) Transferee Company Account: (6) Equity Shares (Transferee Comp.) (7) Pref. Share (Transferee Comp.)

A. TRANSFER OF INDIVIDUAL ASSETS : (1) Realisation A/C Dr

To Individual Assets A/C (@ Book Value) (NOTE: These assets are to be transferred at book value and even those assets which are not taken over are to be transferred and agreed values are not be considered. Assets have to be transferred on individual basis and provisions are not to be deducted from these assets. Fictitious assets are not be transferred whereas intangible assets have to be transferred at book value. Cash and Bank

balances will be transferred if taken over in case of amalgamation by purchase but in merger, they will have to be transferred.

B. TRANSFER OF INDIVIDUAL LIABILITIES :

(1) Individual Liability A/C Dr To realisation AC (NOTE: Liabilities are also to be transferred at book value as the objective is to make their balance nil and close the account and therefore the agreed values are ignored for this transfer entry. Liabilities include only the external liabilities to be refelected whether taken over or not. Reserves and Surplus not to be transferred except those funds where liabilities have arisen. All liabilities to be transfeered and all provision to be transferred. C. RECORD THE PURCHASE CONSIDERATION (1) Transferee Company Dr To Realisation A/c (with the amount of purchase consideration)