OTHER ACCOUNTING STANDARDS 9.

23 a

UNIT 2: ACCOUNTING STANDARD 14 ACCOUNTING

FOR AMALGAMATIONS

LEARNING OUTCOMES
After studying this unit, you will be able to comprehend the –
 Types of amalgamation – merger and purchase;
 Accounting for amalgamation – Pooling of interest method and
purchase method;
 Computation of Purchase consideration;
 Amalgamation post balance sheet date;
 Disclosure requirements of AS 14;

2.1 INTRODUCTION
AS 14 (Revised) deals with the accounting to be made in the books of Transferee
company in the case of amalgamation and the treatment of any resultant
goodwill or reserve.
An amalgamation may be either in the nature of merger or purchase. The
standard specifies the conditions to be satisfied by an amalgamation to be
considered as amalgamation in nature of merger or purchase.
An amalgamation in nature of merger is accounted for as per pooling of interests
method and in nature of purchase is dealt under purchase method.

Pooling of Interest
Merger
Method
Types of
Amalgamation

Purchase Purchase Method

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 a 9.24 ADVANCED ACCOUNTING

The standard describes the disclosure requirements for both types of

amalgamations in the first financial statements. We will discuss the other
amalgamation aspects in detail in subsequent paragraphs of this unit.

Note:
AS 14 (Revised) does not deal with cases of acquisitions. The distinguishing
feature of an acquisition is that the acquired company is not dissolved and its
separate entity continues to exist.

2.2 DEFINITION OF THE TERMS USED IN THE

STANDARD
 Amalgamation means an amalgamation pursuant to the provisions of the
Companies Act, 2013 or any other statute which may be applicable to
companies and includes ‘merger’.
 Transferor company means the company which is amalgamated into
another company.
 Transferee company means the company into which a transferor company is
amalgamated.

2.3 TYPES OF AMALGAMATIONS

Amalgamations fall into two broad categories.

Types of amalgamations

Merger Purchase

 Merger - In amalgamations where there is a genuine pooling not merely of

the assets and liabilities of the amalgamating companies but also of the
shareholders’ interests and of the businesses of these companies.
 Purchase - In amalgamations which are in effect a mode by which one
company acquires another company and as a consequence:

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 the shareholders of the company which is acquired normally do not

continue to have a proportionate share in the equity of the combined
company, or
 the business of the company which is acquired is not intended to be
continued. Such amalgamations are amalgamations in the nature of
'purchase'.

2.4 AMALGAMATION IN THE NATURE OF

MERGER
Amalgamation in the nature of merger is an amalgamation which satisfies all the
following conditions.
(i) All the assets and liabilities of the transferor company become, after
amalgamation, the assets and liabilities of the transferee company.
(ii) Shareholders holding not less than 90% of the face value of the equity
shares of the transferor company (other than the equity shares already held
therein, immediately before the amalgamation, by the transferee company
or its subsidiaries or their nominees) become equity shareholders of the
transferee company by virtue of the amalgamation.
(iii) The consideration for the amalgamation receivable by those equity
shareholders of the transferor company who agree to become equity
shareholders of the transferee company is discharged by the transferee
company wholly by the issue of equity shares in the transferee company,
except that cash may be paid in respect of any fractional shares.
(iv) The business of the transferor company is intended to be carried on, after
the amalgamation, by the transferee company.
(v) No adjustment is intended to be made to the book values of the assets and
liabilities of the transferor company when they are incorporated in the
financial statements of the transferee company except to ensure uniformity
of accounting policies.
Example: X Ltd and Y Ltd are both in telecom business. As per the arrangement
X Ltd will get merged with Y Ltd and their shareholders will get shares in Y Ltd.
X Ltd operations will going to be continued under Y ltd.

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2.5 AMALGAMATION IN THE NATURE OF

PURCHASE
Amalgamation in the nature of purchase is an amalgamation which does not
satisfy any one or more of the conditions specified above for “Amalgamation in
the nature of merger”.

2.6 METHODS OF ACCOUNTING FOR

AMALGAMATIONS
There are two main methods of accounting for amalgamations.
 For an amalgamation in the nature of merger - pooling of interests method
and
 For an amalgamation in the nature of purchase - purchase method.

2.6.1 Pooling of Interests Method

Pooling of interests is a method of accounting for amalgamations the object of
which is to account for the amalgamation as if the separate businesses of the
amalgamating companies were intended to be continued by the transferee
company. Accordingly, only minimal changes are made in aggregating the
individual financial statements of the amalgamating companies.
Under this method, the assets, liabilities and reserves of the transferor company
are recorded by the transferee company at their existing carrying amounts
If, at the time of the amalgamation, the transferor and the transferee companies
have conflicting accounting policies, a uniform set of accounting policies is
adopted following the amalgamation. The effects on the financial statements of
any changes in accounting policies are reported in accordance with AS 5.

2.6.2 Purchase Method

Under the purchase method, the transferee company accounts for the
amalgamation either

 By incorporating the assets and liabilities at their existing carrying amounts or

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 By allocating the consideration to individual identifiable assets and liabilities

of the transferor company on the basis of their fair values at the date of
amalgamation. The identifiable assets and liabilities may include assets and
liabilities not recorded in the financial statements of the transferor company.

2.7 CONSIDERATION
Consideration for the amalgamation means the aggregate of the shares and other
securities issued and the payment made in the form of cash or other assets by the
transferee company to the shareholders of the transferor company. In
determining the value of the consideration, an assessment is made of the fair
value of its elements.
Clarification Chart:

Method I – Net Payment Method Method II – Net Assets Method

Note: We need to compute P.C. by Net Payment Method only. If it cannot be

computed by Net Payment Method – then Net Assets Method will be
applicable.

Situation I – If it is a Merger Situation I – if it is a Merger

Equity shares issued to ESH (cash may Assets at Book value

be paid in case fraction arises) -
+ Liabilities at Book value
Any form of payment given to PSH -
Reserves and Surplus
=
ESC + PSC
Situation II – If it is a case of Situation II – If it is a case of
Purchase Purchase

Any form of payment given to ESH Assets at agreed value

+ -
Any form of payment given to PSH Liabilities at agreed value

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 a 9.28 ADVANCED ACCOUNTING

Many amalgamations recognise that adjustments may have to be made to the

consideration in the light of one or more future events. When the additional
payment is probable and can reasonably be estimated at the date of
amalgamation, it is included in the calculation of the consideration. In all other
cases, the adjustment is recognised as soon as the amount is determinable

2.8 TREATMENT OF RESERVES OF THE

TRANSFEROR COMPANY ON AMALGAMA-
TION
If the amalgamation is an ‘amalgamation in the nature of merger’, the identity of
the reserves is preserved and they appear in the financial statements of the
transferee company in the same form in which they appeared in the financial
statements of the transferor company.
Thus, for example, the General Reserve of the transferor company becomes the
General Reserve of the transferee company, the Capital Reserve of the transferor
company becomes the Capital Reserve of the transferee company and the
Revaluation Reserve of the transferor company becomes the Revaluation Reserve
of the transferee company. As a result of preserving the identity, reserves which
are available for distribution as dividend before the amalgamation would also be
available for distribution as dividend after the amalgamation.

2.9 ADJUSTMENTS TO RESERVES -

AMALGAMATION IN THE NATURE OF
MERGER
When an amalgamation is accounted for using the pooling of interests method,
the reserves of the transferee company are adjusted to give effect to the
following:
 A uniform set of accounting policies should be adopted following the
amalgamation and, hence, the policies of the transferor and the transferee
are aligned.

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 Difference between the amount recorded as share capital issued (plus any
additional consideration in the form of cash or other assets) and the amount
of share capital of the transferor company.

2.10 ADJUSTMENTS TO RESERVES -

AMALGAMATION IN THE NATURE OF
PURCHASE
If the amalgamation is an ‘amalgamation in the nature of purchase’, the identity
of the reserves, other than the statutory reserves is not preserved. The amount of
the consideration is deducted from the value of the net assets of the transferor
company acquired by the transferee company. If the result of the computation is
negative, the difference is debited to goodwill arising on amalgamation and if the
result of the computation is positive, the difference is credited to Capital Reserve.
Certain reserves may have been created by the transferor company pursuant to
the requirements of, or to avail of the benefits under, the Income-tax Act, 1961;
for example, Development Allowance Reserve, or Investment Allowance Reserve
or any other statutory reserve. The Act requires that the identity of the reserves
should be preserved for a specified period. Likewise, certain other reserves may
have been created in the financial statements of the transferor company in terms
of the requirements of other statutes. Though normally, in an amalgamation in
the nature of purchase, the identity of reserves is not preserved, an exception is
made in respect of reserves of the aforesaid nature (referred to hereinafter as
‘statutory reserves’) and such reserves retain their identity in the financial
statements of the transferee company in the same form in which they appeared in
the financial statements of the transferor company, so long as their identity is
required to be maintained to comply with the relevant statute. This exception is
made only in those amalgamations where the requirements of the relevant
statute for recording the statutory reserves in the books of the transferee
company are complied with.
In such cases the statutory reserves are recorded in the financial statements of
the transferee company by a corresponding debit to a suitable account head (e.g.,
‘Amalgamation Adjustment Reserve’) which is presented as a separate line item.
When the identity of the statutory reserves is no longer required to be
maintained, both the reserves and the aforesaid account are reversed.

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The Standard gives a title, which reads as "Reserve". This gives rise to following
requirements.
1. The corresponding debit is "also" to a Reserve Account

2. That Reserve account will show a negative balance

3. But it has to be shown as a separate line item - Which implies, that this debit
"cannot be set off against Statutory reserve taken over".
So the presentation will be as follows:
Notes to Accounts for “Reserves and Surplus”

Description Amount Amount

(Current year) (Previous Year)

Statutory Reserve (taken over from

transferor company)
General Reserve
Profit and Loss or Retained Earnings
Amalgamation Adjustment Reserve (--) (--)
(negative balance)

2.11 TREATMENT OF GOODWILL ARISING ON

AMALGAMATION
Goodwill arising on amalgamation represents a payment made in anticipation of
future income and it is appropriate to treat it as an asset to be amortised to
income on a systematic basis over its useful life. Due to the nature of goodwill, it
is frequently difficult to estimate its useful life with reasonable certainty. Such
estimation is, therefore, made on a prudent basis. Accordingly, it is considered
appropriate to amortise goodwill over a period not exceeding five years unless a
somewhat longer period can be justified.
Factors which may be considered in estimating the useful life of goodwill arising
on amalgamation include:
(a) the foreseeable life of the business or industry

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(b) the effects of product obsolescence, changes in demand and other

economic factors
(c) the service life expectancies of key individuals or groups of employees

(d) expected actions by competitors or potential competitors

(e) legal, regulatory or contractual provisions affecting the useful life

2.12 BALANCE OF PROFIT AND LOSS ACCOUNT

In the case of an ‘amalgamation in the nature of merger’, the balance of the Profit
and Loss Account appearing in the financial statements of the transferor company
is aggregated with the corresponding balance appearing in the financial
statements of the transferee company. Alternatively, it is transferred to the
General Reserve, if any.

In the case of an ‘amalgamation in the nature of purchase’, the balance of the

Profit and Loss Account appearing in the financial statements of the transferor
company, whether debit or credit, loses its identity.

2.13 DISCLOSURES
For all amalgamations, the following disclosures are considered appropriate in the
first financial statements following the amalgamation:
a. Names and general nature of business of the amalgamating companies;
b. Effective date of amalgamation for accounting purposes;

c. The method of accounting used to reflect the amalgamation; and

d. Particulars of the scheme sanctioned under a statute.
For amalgamations accounted for under the pooling of interests method, the
following additional disclosures are considered appropriate in the first financial
statements following the amalgamation:
a. Description and number of shares issued, together with the percentage of
each company’s equity shares exchanged to effect the amalgamation;

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b. The amount of any difference between the consideration and the value of
net identifiable assets acquired, and the treatment thereof.
For amalgamations accounted for under the purchase method, the following
additional disclosures are considered appropriate in the first financial statements
following the amalgamation:
a. Consideration for the amalgamation and a description of the consideration
paid or contingently payable; and
b. The amount of any difference between the consideration and the value of
net identifiable assets acquired, and the treatment thereof including the
period of amortisation of any goodwill arising on amalgamation.

2.14 AMALGAMATION AFTER THE BALANCE

SHEET DATE
When an amalgamation is effected after the balance sheet date but before the
issuance of the financial statements of either party to the amalgamation
disclosure is made in accordance with AS 4 ‘Contingencies and Events Occurring
After the Balance Sheet Date’ but the amalgamation is not incorporated in the
financial statements. In certain circumstances the amalgamation may also
provide additional information affecting the financial statements themselves for
instance by allowing the going concern assumption to be maintained.

Illustration 1
A Ltd. take over B Ltd. on April 01, 20X1 and discharges consideration for the
business as follows:
(i) Issued 42,000 fully paid equity shares of ` 10 each at par to the equity
shareholders of B Ltd.
(ii) Issued fully paid up 15% preference shares of ` 100 each to discharge the
preference shareholders ( ` 1,70,000) of B Ltd. at a premium of 10%.

(iii) It is agreed that the debentures of B Ltd. ( ` 50,000) will be converted into
equal number and amount of 13% debentures of A Ltd.
Determine the amount of purchase consideration as per AS 14.

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 OTHER ACCOUNTING STANDARDS 9.33 a

Solution

Particulars `
Equity Shares (42,000 x 10) 4,20,000
15% Preference Share Capital 1,70,000
Add: Premium on Redemption 17,000
Purchase Consideration 6,07,000

Note: As per AS 14, consideration for the amalgamation means the aggregate of
the shares and other securities issued and the payment made in the form of cash
or other assets by the transferee company to the shareholders of the transferor
company. Thus, payment to debenture holders are not covered by the term
‘consideration’.

Illustration 2
A Ltd. and B Ltd. were amalgamated on and from 1st April, 20X1. A new company C
Ltd. was formed to take over the business of the existing companies. A Ltd. and
B Ltd. have the following ledger balances as on 31st March, 20X1:

A Ltd. B Ltd.
(` in lakhs) (` in lakhs)
Land and Building 550 400
Plant and Machinery 350 250
Investments (Non-current) 150 50
Inventory 350 250
Trade Receivables 300 350
Cash and Bank 300 200
Share Capital:
Equity Shares of ` 100 each 800 750
12% Preference shares of ` 100 each 300 200
Reserves and Surplus:
Revaluation Reserve 150 100
General Reserve 170 150
Investment Allowance Reserve 50 50

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Profit and Loss Account 50 30

Secured Loans:
10% Debentures ( ` 100 each) 60 30
Trade Payables 420 190

Additional Information:
(1) 10% Debenture holders of A Ltd. and B Ltd. are discharged by C Ltd. issuing
such number of its 15% Debentures of ` 100 each so as to maintain the same
amount of interest.
(2) Preference shareholders of the two companies are issued equivalent number
of 15% preference shares of C Ltd. at a price of ` 150 per share (face value of
` 100).
(3) C Ltd. will issue 5 equity shares for each equity share of A Ltd. and 4 equity
shares for each equity share of B Ltd. The shares are to be issued @ ` 30 each,
having a face value of ` 10 per share.
(4) Investment allowance reserve is to be maintained for 4 more years.
Prepare the Balance Sheet of C Ltd. as on 1st April, 20X1 after the amalgamation
has been carried out on the basis of Amalgamation in the nature of purchase.
Solution
Balance Sheet of C Ltd. as at 1st April, 20X1

Particulars Note No. (` in lakhs)

I. Equity and Liabilities
(1) Shareholder's Funds
(a) Share Capital 1 1,200
(b) Reserves and Surplus 2 1,650
(2) Non-Current Liabilities
Long-term borrowings 3 60
(3) Current Liabilities
Trade payables 8 610
Total 3,520

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II. Assets
(1) Non-current assets
(a) Property, Plant and 4 1,550
Equipment
(b) Intangible assets 5 20
(c) Non-current investments 6 200
(2) Current assets
(a) Inventory (350 + 250) 600
(b) Trade receivables 7 650
(c) Cash and bank balances
(300 + 200) 500
Total 3,520

Notes to Accounts

(` in lakhs) (` in lakhs)
1. Share Capital
Equity share capital (W.N.1)
70,00,0001 Equity shares of ` 10 each 700
5,00,0002 Preference shares of 500
` 100 each
(all the above shares are allotted as 1,200
fully paid-up pursuant to contracts
without payment being received in
cash)
2. Reserves and surplus
Securities Premium Account (W.N.3)
(950 + 700) 1,650

1
40,00,000 + 30,00,000
2
3,00,000 + 2,00,000

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Investment Allowance Reserve (50 + 100

50)
Amalgamation Adjustment Reserve
(50 + 50) (100) 1,650
3. Long-term borrowings
15% Debentures 60
4. Property, Plant and Equipment
Land and Building (550 + 400) 950
Plant and Machinery (350 + 250) 600 1,550
5. Intangible assets
Goodwill [W.N. 2] (110 – 90) 20
6. Non-current Investments
Investments (150 + 50) 200
7. Trade receivables (300 + 350) 650
8. Trade payables (420 + 190) 610
Working Notes:

(` in lakhs)
A Ltd. B Ltd.
(1) Computation of Purchase consideration
(a) Preference shareholders:
 3,00,00,000 
 i.e. 3,00,000 shares  × ` 150 each 450
 100 
 2,00,00,000 
 i.e. 2,00,000 shares  × ` 150 each 300
 100 
(b) Equity shareholders:
 8,00,00,000 × 5 
 i.e. 40,00,000 shares  × ` 30 each 1,200
 100 
 7,50,00,000 × 4 
 i.e. 30,00,000 shares  × ` 30 each _____ 900
 100 
Amount of Purchase Consideration 1,650 1,200

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 OTHER ACCOUNTING STANDARDS 9.37 a

(2) Net Assets Taken Over

Assets taken over:
Land and Building 550 400
Plant and Machinery 350 250
Investments 150 50
Inventory 350 250
Trade receivables 300 350
Cash and bank 300 200
2,000 1,500
Less: Liabilities taken over:
Debentures 40 20
Trade payables 420 190
460 210
Net assets taken over 1,540 1,290
Purchase consideration 1,650 1,200
Goodwill 110 ____
Capital reserve 90
(3) Computation of securities premium
On preference share capital
A Ltd.- 3,00,000 x 50 150
B Ltd.- 2,00,000 x 50 100
On equity share capital
A Ltd.- 40,00,000 x 20 800
B Ltd.- 30,00,000 x 20 ____ 600
Total 950 700

Note: For problems based on practical application of AS 14 (Revised)

students are advised to refer Chapter 14 ‘Accounting for Amalgamation of
Companies’ of the study material.

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 a 9.38 ADVANCED ACCOUNTING

TEST YOUR KNOWLEDGE

Multiple Choice Questions
1. Which of the following statement is correct:
(a) In case of merger – ESH can be issued only equity shares as a part of
Purchase consideration.
(b) In case of purchase – ESH can be issued Preference shares also as a part
of Purchase consideration.

(c) Both (a) and (b) are correct.

(d) Both (a) and (b) are incorrect.
2. State which statement is correct:

(a) In case of merger – assets and liabilities can only be taken over at book
values.
(b) In case of purchase – assets and liabilities can be taken over at book
values or agreed values.
(c) Both (a) and (b) are correct.
(d) Both (a) and (b) are incorrect.

3. State which statement is correct:

(a) In case of merger – All Reserves and surplus of vendor company are
taken over by Purchasing company.

(b) In case of Purchase – None of the Reserves and surplus of vendor

company are taken over by Purchasing company.
(c) Both (a) and (b) are correct.

(d) Only (a) is correct.

4. State which statement is correct:
(a) In case of merger – We use pooling of interest method for accounting.

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(b) In case of Purchase We use purchase method or pooling of interest

method depending upon whether it is take over at agreed values or
book values.

(c) Both (a) and (b) are correct.

(d) Only (a) is correct.
5. State which statement is incorrect:
(a) In case of merger – We can issue either preference shares or equity
shares to PSH.
(b) In case of Purchase – We can issue either preference shares or equity
shares to PSH.
(c) In case of merger – We can issue only preference shares to PSH.
(d) none of the above.

Theoretical Questions
6. Briefly describe the disclosure requirements for amalgamation including
additional disclosure, if any, for different methods of amalgamation as per AS
14 (Revised).
7. List the conditions to be fulfilled as per AS 14 (Revised) for an amalgamation
to be in the nature of merger, in the case of companies.

8. Briefly explain the methods of accounting for amalgamation as per

Accounting Standard-14.

Scenario based Questions

9. X Co. Ltd. having share capital of ` 50 lakhs divided into equity shares of ` 10
each was taken over by Y Co. Ltd. Y Co. Ltd. issued 11 equity shares of ` 10
each for every 10 shares of X Co. Ltd.
Explain how the difference will be adjusted in the books of Y Co. Ltd. for the
shares issued under the 'Pooling of interests method' of amalgamation as per
AS 14.

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10. On 1st April, 2018, Tina Ltd. take over the business of Rina Ltd. and
discharged purchase consideration as follows:
(i) Issued 50,000 fully paid Equity shares of ` 10 each at a premium of ` 5
per share to the equity shareholders of Rina Ltd.
(ii) Cash payment of ` 50,000 was made to equity shareholders of Rina Ltd.
(iii) Issued 2,000 fully paid 12% Preference shares of ` 100 each at par to
discharge the preference shareholders of Rina Ltd.
(iv) Debentures of Rina Ltd. 20,000) will he converted into equal number
and amount of 10% debentures of Tina Ltd.

Calculate the amount of Purchase consideration as per AS-14 and pass

Journal Entry relating to discharge of purchase consideration in the books of
Tina Ltd.

ANSWERS/SOLUTIONS
Answer to the Multiple Choice Questions
1. (b) 2. (c) 3. (d) 4. (d) 5. (c)

Answer to the Theoretical Questions

6. The disclosure requirements for amalgamations have been prescribed in
paragraphs 43 to 46 of AS 14 (Revised) on Accounting for Amalgamation.
Refer Para 2.5 for details.
7. According to AS 14 "Accounting for Amalgamations", Amalgamation in the
nature of merger is an amalgamation which satisfies all the following
conditions:
(i) All the assets and liabilities of the transferor company become, after
amalgamation, the assets and liabilities of the transferee company.
(ii) Shareholders holding not less than 90% of the face value of the equity
shares of the transferor company (other than the equity shares already
held therein, immediately before the amalgamation, by the transferee
company or its subsidiaries or their nominees) become equity

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 OTHER ACCOUNTING STANDARDS 9.41 a

shareholders of the transferee company by virtue of the

amalgamation.
(iii) The consideration for the amalgamation receivable by those equity
shareholders of the transferor company who agree to become equity
shareholders of the transferee company is discharged by the
transferee company wholly by the issue of equity shares in the
transferee company, except that cash may be paid in respect of any
fractional shares.
(iv) The business of the transferor company is intended to be carried on,
after the amalgamation, by the transferee company.
(v) No adjustment is intended to be made to the book values of the
assets and liabilities of the transferor company when they are
incorporated in the financial statements of the transferee company
except to ensure uniformity of accounting policies.
8. As per AS 14 on 'Accounting for Amalgamations', there are two main
methods of accounting for amalgamations:

The Pooling of Interest Method

Under this method, the assets, liabilities and reserves of the transferor
company are recorded by the transferee company at their existing carrying
amounts (after making the necessary adjustments).
If at the time of amalgamation, the transferor and the transferee companies
have conflicting accounting policies, a uniform set of accounting policies is
adopted following the amalgamation. The effects on the financial
statements of any changes in accounting policies are reported in
accordance with AS 5 on 'Net Profit or Loss for the Period, Prior Period
Items and Changes in Accounting Policies'.

The Purchase Method

Under the purchase method, the transferee company accounts for the
amalgamation either by incorporating the assets and liabilities at their
existing carrying amounts or by allocating the consideration to individual
identifiable assets and liabilities of the transferor company on the basis of

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their fair values at the date of amalgamation. The identifiable assets and
liabilities may include assets and liabilities not recorded in the financial
statements of the transferor company.

Answer to the Scenario based Questions

9. Particulars `
Purchase consideration = 5,00,000 x 11/10 = 55,000 shares 55,00,000
of ` 10 each 50,00,000
Less: Share capital of X Co. Ltd.
Difference Adjusted through General Reserve 5,00,000

10. As per AS 14, consideration for the amalgamation means the aggregate of
the shares and other securities issued and the payment made in the form of
cash or other assets by the transferee company to the shareholders of the
transferor company.

Computation of Purchase Consideration

Particulars `
Equity Shares (50,000x 15) 7,50,000
Cash payment 50,000
12% Preference Share Capital 2,00,000
Purchase Consideration 10,00,000

Note: Payment to debenture holders are not covered by the term

‘consideration’.

Journal entry

Particulars ` `
Liquidation of Rina Ltd. A/c 10,00,000
To Equity share capital A/c 5,00,000
To 12% Preference share capital A/c 2,00,000
To Securities premium A/c 2,50,000
To Bank/Cash A/c 50,000
(Being payment of cash and issue of shares for
discharge of purchase consideration)

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