Share buy-back accounting entries | AccountingWEB

Share buy-back accounting entries

On 09 March 2011 Jennifer Adams posted an article on, Share buy-backs: Get the details right.  The accounting entries puzzle me.  For example.  A shareholder subscribed and paid in full for 90,000 £1 ordinary shares 10 years ago.  This is a private trading company and the buy-back will benefit the trade.  The payment for the shares is to be £146,000.  This could be settled by three means (i) bank payment £45,000 plus (ii) loan £20,000 plus (iii) stock £81,000.

Debit Share Capital £90,000 and Debit ??? £56,000

Credit Bank £45,000 Credit Loan £20,000 and Credit Stock £81,000

Query - is Debit ??? = the Profit and Loss b/fwd balance?

Also as stock would have to be sold at market value, not cost, and VAT would have to be added to the sale price this would appear to knock this idea on the head as the former shareholder will not be a VAT registered business in her/his own right.

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Tonykelly |
Tonykelly's picture

I think TonyKelly may be getting mixed up with ....



yeboyye |