23.7 ACCOUNTING PROCEDURES FOR COMBINATIONS
23.7.1 Acquisition
In case of acquisition, the target firm ceases to exist and so it closes its accounts. Two accounts are particularly relevant in this case. They are:
- Realisation Account;
- Shareholders’ Account.
On the credit side of the Realisation Account are entered the liabilities taken over by the acquiring firm and also the purchase consideration. On the debit side of the Realisation Account are entered the assets taken over by the acquiring firm. In case the liquidation expenses borne by the vendor firm, they are also entered on the debit side. The amount by which the credit side exceeds the debit side shows the profit on realisation.
The other account is the Sundry Equity Shareholders’ Account. ...
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