Buying an existing business (shop)

lb364

Thanks again - out of interest, what pages should you receive of a company's accounts? I looked at a business once before and when I asked for the accounts all I received was an email with a very vague Profit & loss page along with a balance sheet (again very vague)

Is this normal practice or should they provide the full set, i.e. the breakdown for everything on the balance sheet?

(Sorry if that makes no sense, the technical aspects of my accounts studies have escaped me over the years..!)

pitkin2020

lb364 wrote: »

Thanks again - out of interest, what pages should you receive of a company's accounts? I looked at a business once before and when I asked for the accounts all I received was an email with a very vague Profit & loss page along with a balance sheet (again very vague)

Is this normal practice or should they provide the full set, i.e. the breakdown for everything on the balance sheet?

(Sorry if that makes no sense, the technical aspects of my accounts studies have escaped me over the years..!)

It really does depend. Most people will want to see everything but a lot of people selling the business may not want just anyone looking at all the info as it may contain suppliers etc that you could then just use the info to go off and set up on your own.

I liked the quote regarding a binded set of accounts, I never thought of that but you don't see many other people with a binding machine these days apart from accountants lol

Pennywise

It is usual protocol for the sellers' accountants to produce "selling accounts" which consist of an adjusted profit & loss account, with certain expenses taken out - being those not relevant to a prospective purchaser, i.e. depreciation, finance charges, proprietors wages etc. The sellers' accountant usually signs these selling accounts to give some credibility to the figures. Also usually supplied are copies of recent VAT returns which confirm turnover. After the initial stages and when a prospective buyer has proved to be serious, additional information is usually supplied such as stock values, debtors and creditors ageing reports, etc.

As an accountant, we tell clients not to supply their "bound" accounts as they contain irrelevant information to a buyer and may complicate things rather than help the sale. After all, the buyer will be arranging their own finance and paying a different price for equipment etc than the seller, so finance charges and depreciation charged in the sellers accounts are completely irrelevant. From the other end, when acting for a prospective buyer, we insist on "selling" accounts, stock take, aged debtors & creditors and equipment list, from which we can produce forecasts and budgets to show whether it's a viable concern at the price asked and also the level of loans and working capital the buyer is going to need.