AMALGAMATION AND SALE OF FIRMS
Amalgamation
What is amalgamation?
Amalgamation is, basically, the union of two or more firms to form a new one. Two or more firms combine together and the outcome is a totally new firm. Neither of the old firms remain in entity, rather a new firm comes into existence. In order to avoid cut-throat competition, to achieve both external and internal economies and to take advantage of the large-scale business, it is quite common that the entrepreneurs amalgamate their firms and form a new firm. When existing firms are sold to a new firm, then the following problems are very commonly seen.

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1. In almost all the cases, the …show more content…
Revalue such assets and liabilities as have been taken over by the new firm at revised values: revalue all those assets and liabilities which have been taken over by the new firm at values other than book value. This revaluation is done through revaluation account. Close this account by transferring its balance to capital accounts of partners in their profit-sharing ratio.
Step 2. Close all assets and liabilities not taken over by the new firm: pay off such liabilities as have not been taken over by the new firm. Alternatively, close them by transferring them to partners’ capital account in the profit –sharing ratio. Similarly, close those asset accounts also which have not been taken over by the new firm by transferring them to capital accounts in the profit-sharing ratio.
Step3. Close such assets and liabilities accounts as have been taken over by the firm: for closing the assets account that have been taken over by the new firm, we need to debit new firm account and credit the respective assets account.
For closing the liabilities account, debit liabilities and credit new …show more content…
Close new firm’s account and capital accounts: close the new firm’s account and capital accounts of all partners by debiting capital accounts and crediting new firm’s account. The amount of capital accounts are calculated after taking into consideration the opening balances and entries passed in respect of revaluation of assets and liabilities, accumulated profits and losses and assets and liabilities not taken over by the firm.

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Books of new firm
The new firm is opened by amalgamating the old firms and opening entries are done in the books of new firm. The rules are as under:
(1). Debit all assets taken over at revised values, if any; credit all liabilities taken over at revised values, if any. Credit the capital accounts of all the partners.
(2). Adjust the capital accounts in the light of requirements of the new firm.
SALE OF FIRM TO A COMPANY http://www.leadershipcloseup.com/2014/10/28/strategy-merger-four-steps-law-firm-leaders/ Sometimes, a partnership business is ‘taken over’ or purchased by a company. A welcome takeover generally goes smoothly as both the parties to the contract are willing to do it. On the contrary, an unwelcome or hostile takeover can be quite unpleasant. When the takeover goes through, the acquiring company becomes responsible for all the holdings, debts and assets of the target