Question

the amount paid to new firm on amalgamation is called​

Answer 1

Explanation:

When a firm admits a new partner with a view to secure additional capital or better business skill, it is known as admission of partner in an existing firm. In the same manner, two or more independent firms, engaged in identical business activities, may combine their activities into a New Firm and this combination or consolidation is known as Amalgamation of Firms. Thus, two or more firms are said to amalgamate when they join together, pool their resources and run the business into a composite form, as a new firm – as a single integrated unit.

Generally, the following problems come up while existing firms are merged into a new firm.

Closing Entries of the Existing Firm:

1. Revaluation of Assets and Liabilities:

1. In certain cases, the new firm takes over the complete or partial assets and liabilities of the amalgamating firms either at book value or at revised value. If revaluation is agreed upon, the amalgamating firms have to prepare Revaluation Account. The surplus or deficit of such account is transferred to the Partners’ Capital Account (in profit sharing ratio) of the amal­gamating firms.

Answer 2

Answer:

When a firm admits a new partner with a view to secure additional capital or better business skill, it is known as admission of partner in an existing firm. In the same manner, two or more independent firms, engaged in identical business activities, may combine their activities into a New Firm and this combination or consolidation is known as Amalgamation of Firms. Thus, two or more firms are said to amalgamate when they join together, pool their resources and run the business into a composite form, as a new firm – as a single integrated unit.

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