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What is the difference between absorption, amalgamation and
liquidation of companies? And why realisation account is
being prepared ?
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Answer / jayanti
Absorption refers to the process by which a company fully
takes over another company and carries on the existing
business of his with additional resources of the company
taken over.. while amalgamation means two companies coming
together to form a new entity and carry on the businees.
realisation account is prepared just to make a statement
showing the distribution of the companies assets that are
realised among shareholders, creditors and others before
the company is fully closed.
| Is This Answer Correct ? | 55 Yes | 6 No |
Answer / thouhid
1. Liquidation
Two or more companies are liquidated in the process of amalgamation. One or more companies are liquidated in absorption.
2. Formation
In amalgamation, a new company is formed to take over the business of vendor companies. In absorption, no new company is formed, only purchasing or absorbing company take over the business of liquidated company.
3. Size
There is no such matter of size of amalgamating companies. Generally, size of purchasing company is greater than that of vendor company in absorption.
| Is This Answer Correct ? | 28 Yes | 1 No |
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