I have a client who purchased a list of clients for £18K payable over 3 years, from an old boss of his who was retiring.
My clients turnover(ltd company) for his first year of trading was £50K, profit of £26K, during this period my client has lost some clients and gained new clients.
Details of the previous owners accounts for last year are:
T/O - £62K, Net profit - £1.3K
My question is would you put through the £18K as goodwill or based on turnover should it be more?
Thanks for your help guys!
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Replies (4)
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Cost
You should include it at cost.
Not that it would make any difference to my above answer, but the previous owner's accounts may be quite different to your client's, eg they may include a big salary to someone (maybe your client?) whereas now your client does everything himself and has no payroll cost?
Don't quite understand the question. You say client has bought goodwill for £18,000 and you ask how much to include it in the accounts at. Without wanting to be facetious, the answer is obviously £18,000. If the same client bought a computer for use in his business for £1,000 would you have any difficulty deciding how much to include it in the accounts at?
@John
I feel the poster was just making sure that he had it right and may have been confused by the valuing of the goodwill say when transferring from S/Employed to Ltd Co . If he is as tired as I am after the January rush making a cup of tea takes alot of brain power.