A client of mine ran a shop through a limited company. They have now sold the business. The purchaser would not simply buy the share capital and insisted on buying the trade and assets (fair enough as this removes them from any unknown liabilities of the company).
The deal was that the purchaser would pay £50k plus the value of the stock (lower of cost or NRV - in this case cost). The stock was valued at £8k. In addition the NBV of fixed assets was £10k. So we have proceeds of £58k, fixed assets of £10k and stock of £8k - giving a profit of £40k.
We just want to make sure we disclose the profit on sale of £40k correctly in the P&L submitted alongside the CT600 (company files abbreviated accounts so irrelevant for stat accounts).
I assume that double entries would be:
Dr Cash £58k
Cr Fixed Assets £10k
Cr Stock £10k
Cr Other Income (profit on sale of business) £40k
Or do we treat the fixed assets as ordinary disposals at NBV (thus generating a profit/loss on disposal of nil - obv we need to think about balancing allowances/charges but this will be nil as the NBV = TWDV). Then simply have proceeds on sale of £48k, offset by the value of the stock.
Surely we don't treat the sale of the stock as part of the business sale as turnover?
Thanks in advance