CORPORATE ACCOUNTING

*B.Com. Second Year*

*Corporate Accounting*

Sunil Kumar Gupta

*Amalgamation of Companies*

When two or more companies with similar interests combine to form a new company, or when one company merges with another, it is called amalgamation of companies.

*Types of Amalgamation of Companies*

Amalgamation of companies is mainly done in two ways:

* Amalgamation in the nature of merger

* Amalgamation in the nature of purchase

* In amalgamation in the nature of merger, the transferor company, i.e., the selling company, transfers all its assets and liabilities to the transferee company, i.e., the purchasing company.  This means the purchasing company takes over all the assets and liabilities of the selling company at their book value.

* Whereas in amalgamation in the nature of purchase, the purchasing company only takes over the actual assets and external liabilities.

* *Objectives of Amalgamation*

* *Elimination of Competition* The main objective of amalgamation of companies is to eliminate competition. Under this, two or more companies can easily compete with other companies doing similar work.

For example, the merger of Idea and Vodafone was done to compete with Jio.

* *Achieving Economies of Scale* When two or more companies amalgamate, their administrative and managerial expenses decrease.

* *Technological Knowledge*

By amalgamating two or more companies, the companies can take maximum advantage of each other's technological knowledge.

* *Ease in Management and Administration*

When two or more companies merge, their managerial and administrative capacity increases.

* *Increase in Productivity*

The amalgamation of two or more companies also increases their productivity.

That is, their production increases.

* *Improvement in Quality* When two or more companies work together, they utilize each other's technical knowledge and modernization, which improves the quality of the goods they produce. 

* *Expert Services*

The merger of companies also allows them to benefit from each other's expert services.

*Mutual Cooperation*

Once the companies are merged, both companies cooperate with each other.