Learn about the amalgamation of partnership firms, where two firms merge to gain benefits such as increased efficiency and business expansion. Discover the process, including the Realisation Method and Purchase Consideration through the Net Asset and Net Payment methods. Understand the roles of Vendor and Purchasing firms in the merging process.
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AMALGAMATION OF PARTNERSHIP FIRMS Amalgamation means combination or merger. In Amalgamation of Firms two firms come together to get various advantages like Advantages of large scale productions Avoid competition Increase efficiency Expansion of business etc. In amalgamation of partnership firms there are two firms namely Vendor firm (old firm) and Purchasing firm (New firm) Vendor firm: It is firms which get dissolved on amalgamation. In simple words the firm which is taken over by purchasing firm is called as vendor firm. Purchasing Firm: The firm which takes over business of old firm is called as purchasing firm. Example:- The business of M/S ABC & Co. is taken over by M/S XYZ & Co. is called as amalgamation. Here M/S ABC & Co. is a Vendor firm and M/S XYZ & Co.is a Purchasing firm.
AMALGAMATION OF PARTNERSHIP FIRMS Realisation Method: Under this method books of old firms are closed and the new purchasing firm start with a fresh books of accounts. In this method following books of accounts are opened in each vendor firm to record various transactions on dissolutions. RealisationAccount Partners Capital Account New firm Account Cash or bank Account( in case if it is not taken over by new firm)
AMALGAMATION OF PARTNERSHIP FIRMS Purchase Consideration: Purchase Consideration (PC) is amount payable by new firm (Purchasing Firm) to Old firm (Vendor Firm) for taking over its business. PC is calculated by 2 methods, which are Net Asset Method and Net Payment Method.
AMALGAMATION OF PARTNERSHIP FIRMS Net Asset Method: PC = Agreed value of Assets taken Agreed value of Liabilities Taken Calculation of PC by Net Asset Method. Particulars AB & Co. CD & Co. I)Assets taken over: Computer Premises Debtors Inventory Furniture and Fixture Plant and Machinery Vehicles Investments Cash and Bank balance Total--------------------------------I II) Liabilities taken over: R.D.D Bills Payable Creditors Bank Loan or Bank Overdraft Outstanding Expenses Total--------------------------------II xx xx xx xx xx xx xx xx xx xxx xx xx xx xx xx xx xx xx xx xxx xx xx xx xx xx xxx xx xx xx xx xx xxx Purchase Consideration (I-II) xxx xxx
AMALGAMATION OF PARTNERSHIP FIRMS Net Payment Method: Under this method PC is equal to the total payment by new firm to partners of old firm. The amount of PC may be given as lumsum or may be calculated by adding up all the amounts paid by the new firm in various forms to the partners of old firms (credited to partners capital in purchasing firm or cash or other asset) i.e. Cash Equity shares in Purchasing Firm Preference Shares in Purchasing Firm Debenture in Purchasing Firm
THANK YOU!! Assistant Prof. Pradeep H. Tawade DEPARTMENT OF ACCOUNTANCY, NSS College of Commerce & Eco. Tardeo, Mumbai-34 Email ID pradeeptawade26@yahoo.com Mobile No. 9619491859
