Acquisition of another business through bank loan

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Good afternoon everyone,

Well I've been advised to look into the account posting of a new business acquisition. 

We have received a bank loan, so the posting for this was debit bank, credit loan account (i have been advised loan will be amortized over time frame of loan).

Purchase of the new business has gone through today but i am a little confused as to how to show this in the balance sheet for the purchase of this new subsidery, which would be treated as an investment. 

Any help would be greatly appreciated.

ps im  not a fully qualified account on initial stages of Cima studies and this is not something i have covered and the FD has no experience on acquisitions.

 

Kind Regards,

Filipa 

 

 

 

 

Replies (2)

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DougScott
By Dougscott
21st Jun 2024 13:56

Assume that there was a legal purchase agreement for this new acquisition which may detail what exactly was being bought. You need to go by that. For example you may be paying just for shares or you may be buying the assets of the business or something else.

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By Paul Crowley
21st Jun 2024 14:11

Assuming there is an accountant doing the accounts and tax.
If so, then just post the cost of purchase on the balance sheet with a sensible title.

If a company was bought then just use the name of the company with the word cost after it and let the financial accountant figure it out later.

He would prefer to do it all in one go, rather than trying to repair incorrect postings.
If money will move between the companies then you will need an intercompany account as well. Do not mix the two up.

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