New RBI Grade B 2025 Notification will come Soon! Enroll Here

    Question

    X Ltd. is merged with Y Ltd. under the pooling of

    interest method. The reserves and surplus of X Ltd. amount to ₹10 lakhs. How will this be treated in the books of Y Ltd.?
    A Not recorded Correct Answer Incorrect Answer
    B Added to General Reserve Correct Answer Incorrect Answer
    C Credited to Capital Reserve Correct Answer Incorrect Answer
    D Merged with retained earnings Correct Answer Incorrect Answer

    Solution

    As per AS 14, under pooling of interests method, all the reserves (including general reserve and surplus) of the transferor company (X Ltd.) are preserved and added to the same heads in the books of transferee company (Y Ltd.). Indian Contract Act, 1872

    Practice Next