What are the different methods of payment of purchase consideration?
Usually the purchasing company will pay price in:
(1) Cash
(2) Shares and
(3) Debentures

What is purchase consideration?
The purchase consideration is the price payable by the purchasing company to the firm for taking over the assets and liabilities. Such price or consideration may be paid in any form like shares, cash and debentures of the company.

Give the meaning of conversion of partnership business into a company?
In order to enjoy the privileges of limited liability, a large number of partnerships are being gradually converted into private and public limited companies or sometimes the partnership is sold to a limited company. This is known as conversion of partnership business into a company.

State the accounts to be opened in the case of private limited company into a limited company?
The accounts are:
(1) Realisation A/c
(2) Capital A/c
(3) New Company's A/c
(4) Shares in new company A/c
(5) Debentures in new company A/c
(6) Bank A/c

Why is realisation account opened?
(1) To close assets account.
(2) To close liabilities account.
(3) To take into consideration the purchase consideration and to find out profit or loss on sale of business to a company.

What is meant by lumpsum method of purchase consideration?
Under this method, the purchasing company pays a fixed amount to the partners for taking over the assets and liabilities of the old firm. In other words it is agreement between the partnership firm and the company.

What is net asset method of purchases consideration?
Under this method the total of the agreed value of the assets taken over by the purchasing company is calculated and from this the agreed value of the liabilities taken over is deducted. The balance is purchase consideration.

Why do partners of the old firm like to continue as shareholders in the new company?
The partners of old firm like to retain control over the company. Hence they like to continue as shareholders in the new company.

State the methods of payment of purchase consideration?
The methods of payment of purchase consideration are:
(1) By shares
(2) Partly by shares and partly by cash
(3) Partly by shares, partly by cash and partly by debentures (only by public limited company).

How is the purchase consideration received by shares and debentures?
The purchase consideration received by shares and debentures is distributed in the ratio of final claims after realisation as per the agreement among the partners.