How to record the purchase of a business

1

Hi,

I recently purchased a business and the withdrawal of the funds to pay the balance of the purchase price is sitting in the suspense account. I’m not sure how to deal with this in manager, more in terms of which account should it be recorded in.

Thanks
Splint

2

I think this is a question for your local accountant as it also depends on the type of business and local laws.

3

It should go under Assets… I would say it is an intangible asset. But, as said, you should better speak with a local chartered accountant

4

Frequently, the actual purchase of a business does not show up in its accounting records, because it is not part of the operation of the business. As already said, this depends on your form of organization and method of acquisition, as well as local laws.

5

@Splint you need to allocate the components of the business purchase along the following lines:

  • Goodwill is an intangible asset.
  • Intellectual property is an intangible asset.
  • Furniture, equipment and motor vehicles are fixed assets that can be depreciated.
  • Inventory can be entered as inventory if you intend to maintain an inventory system and if not it can be allocated to a purchases expense account.
  • Liabilities taken over are entered as liabilities but you need to gross up the net purchase price to allow for any liabilities taken over.
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6

Thanks everyone for the feedback. This definitely sounds like a question for my accountant.

Cheers.