Amalgamation of Partnership Accounting

Amalgamation of Partnership Accounting

In this article we would briefly explain the amalgamation of partnership or accounting of amalgamation of partnership. When two or more partnerships combine to form a new partnership, then this process is known as amalgamation of partnerships. The process of amalgamation includes following

a)    Assets are revalued before amalgamation.

b)   Each Partnership’s goodwill is identified.

c)    Books of account are adjusted (revalued asset & Goodwill).

d)   Each Partnership statement financial position is prepared (before amalgamation).

e)    Goodwill is eliminated.

f)     Amalgamated statement of financial position is prepared.

Amalgamation of partnership Example

	A&B Firm	C&d Firm
Non Current Asset	180,000	200,000
Current Asset	120,000	200,000
	300,000	400,000
Capital A	200,000
Capita B	100,000
Capital C		150,000
Capital D		250,000
	300,000	400,000

Revaluation of asset AB = 100,000

Revaluation of asset CD= 200,000

Goodwill= 50,000

Good will = 80,000

Prepare statement of financial position before and after amalgamation.

Solution

AB Partnership (Books Adjusted)

	A	B
Capital Opening Balance	200,000	100,000
Revaluation	50,000	50,000
Goodwill	25,000	25,000
Capital Closing Balance	275,000	175,000

CD Partnership (Books Adjusted)

	C	D
Capital Opening Balance	150,000	250,000
Revaluation	100,000	100,000
Goodwill	40,000	40,000
Capital Closing Balance	290,000	390,000

Financial statement (after adjustments)

	A&B	C&d
Non Current Asset	280,000	400,000
Current Asset	120,000	200,000
Goodwill	50,000	80,000
	450,000	680,000
Capital A	275,000
Capita B	175,000
Capital C		290,000
Capital D		390,000
Total	450,000	680,000

Goodwill Eliminated

Goodwill eliminated in the books of account. Goodwill is transferred to capital account in accordance with new profit sharing ratio of partners. Goodwill elimination entry has been narrated below.

Date	Particulars	Dr.	Cr.
	A (4/10)	52,000
	B (3/10)	39,000
	C (2/10)	26,000
	D (1/10)	13,000
	Good Will A/c		130,000

Financial Statements (after Amalgamation)

Two firm asset & liabilities are added up for preparing the amalgamated statement of financial position. Capital of each partner is stated separately.

	A&B	C&d	Amalgamated
Non Current Asset	280,000	400,000	680,0000
Current Asset	120,000	200,000	320,000
Goodwill	50,000	80,000
	450,000	680,000	1,000,000
Capital A	275,000		223,000
Capita B	175,000		136,000
Capital C		290,000	264,000
Capital D		390,000	377,000
Total	450,000	680,000	1,000,000