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Allocating Business Purchase Cost
moneymuffin
Posts: 94 Forumite
In October we bought a business from my partners boss. It is a limited company. The purchase went through as my partner taking over existing company.
When I first started doing the accounts we allocated the £5000 to the Directors Loan Accounts then when payment went to previous owner allocated that amount to the assets we were purchasing for that money, thus leaving £5000 showing in the Directors Loan account which we were drawing on to repay finance we had taken out to fund the business purchase .
Having done this I realised that the assets I had allocated money to would already be showing in the company accounts so did not know where to put it so queried it with the accountant. He told me that the money paid the the previous owner actually should go through the Directors Loan Account thus reducing the balance to £500.00.
I walked away feeling like I just lost £4500. I stupidly thought that whatever money a Director put into a business was as a loan. Obviously did not do my research properly.
Was just wanting to check if this information was correct and if it would have been different if say we had set up new company and just bought assets off previous owner.
Hopes this makes sense, I'm very confused. Have a feeling I'm not going to like the answer but just want confirmation really.
When I first started doing the accounts we allocated the £5000 to the Directors Loan Accounts then when payment went to previous owner allocated that amount to the assets we were purchasing for that money, thus leaving £5000 showing in the Directors Loan account which we were drawing on to repay finance we had taken out to fund the business purchase .
Having done this I realised that the assets I had allocated money to would already be showing in the company accounts so did not know where to put it so queried it with the accountant. He told me that the money paid the the previous owner actually should go through the Directors Loan Account thus reducing the balance to £500.00.
I walked away feeling like I just lost £4500. I stupidly thought that whatever money a Director put into a business was as a loan. Obviously did not do my research properly.
Was just wanting to check if this information was correct and if it would have been different if say we had set up new company and just bought assets off previous owner.
Hopes this makes sense, I'm very confused. Have a feeling I'm not going to like the answer but just want confirmation really.
All I ask is the chance to prove that money can't make me happy.
Spike Milligan
Spike Milligan
0
Comments
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Your partners boss was the current shareholder, you buy the shares from him using your own money giving you controlling interest in the company. The company does not pay for these shares, you do.0
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Thanks for the reply. It makes sense when I think about it, after all when do you ever buy something i.e. a business and then get your money back? A lot of wishful thinking on my half I think.
Better crack on making repayments now though.All I ask is the chance to prove that money can't make me happy.
Spike Milligan0 -
Yep, you were hoping the company would buy itself for you. If you think about it, it can't work that way. If it did, I'm first in line to buy ICI
Any further money you invest in it now you own it will go in as Director's Loan.Cash not ash from January 2nd 2011: £2565.:j
OU student: A103 , A215 , A316 all done. Currently A230 all leading to an English Literature degree.
Any advice given is as an individual, not as a representative of my firm.0
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