21 September 2010
investment allowance reserve is a tax concept u/s 32 of income tax act which has been omitted from the act since 2001-02.Such reserve is required to be made for 8 years otherwise exemption provided earlier under under income tax act shall be revoked.
in accounts it is like a ordinary reserve
in case of amalgamation entry is made as follows as per AS-11
So at the time of amalgamation a symbol entry is made in the books of purchasing company
Statutory reserve a/c dr. To investment allowance reserve
And after completion of specified period it is reserved
In the books of selling company(amalgamating co.) it is treated as profit and loss accounts
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