Differences Between Internal Reconstruction and External Reconstruction

Every 20 years Buddhist temples are reconstructed. The idea of Reconstruction is to create something new that would serve the world better. The approach is similar when it comes down to internal and external reconstruction.

When businesses get started, they’re not perfect. The founders learn as they grow. As a result, it becomes important to sometimes reconstruct the existence of the businesses. Some completely change the idea of business and create a new one. Some prefer to stick to the old and reconstruct the internal processes.

No matter what sort of reconstruction it is, it’s important to renovate, recreate, and reassume the business processes and visions as businesses grow.

In this article, we will talk discuss top differences between Internal Reconstruction and external reconstruction.

Internal Reconstruction vs External Reconstruction Infographics

There are many differences between internal reconstruction and external reconstruction. Let’s have a look at them –

Internal Reconstruction vs External Reconstruction – Key differences

There are many differences between internal reconstruction and external reconstruction. The key differences are mentioned below –

• Internal reconstruction needs a lot of time and statutory requirements to occur because in internal reconstruction the company has to take the permission of every stakeholder and also of the court. On the other hand, external reconstruction can be done immediately without any need of permission from the court.
• Both of these reconstructions ensure the change in financial structure. But since internal reconstruction doesn’t liquidate, things become difficult.
• In the case of internal reconstruction, the losses of the company can be set off against the future profit of the company. In the case, external reconstruction the losses of an old company can’t be set off against the profit of the new company.
• Internal reconstruction is done when there is a chance for the existing company to bounce back. External reconstruction is done to start the whole thing afresh.
• The accounting required for both internal reconstruction and external reconstruction are complex.

Internal Reconstruction vs External Reconstruction (Comparison Table)

Conclusion

Internal reconstruction and external reconstruction are both valid for the companies that want to reconsider their approach and future strategy. And both of these depend on the decision and the permission of the stakeholders involved in the whole process.

However, both of these processes are much complex than they are perceived. But if you want to start afresh and your stakeholders are with you, you can be better off by taking the path of external reconstruction since no permission is required from court in the case of external reconstruction.

Recommended Articles –

This is a guide to the key differences between Internal reconstruction and external reconstruction, along with infographics and comparative charts and practical examples. You may also have a look at these following articles –

• Internal vs External Financing
• Bills of Exchange vs Promissory Note
• Balance of Trade vs Balance of Payments
• Marginal Costing vs Absorption Costing

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