How To Do Double Entry Accounting For Acquisition

What is the double entry bookkeeping supposed to be for an acquisition?

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We have recently acquired a business and need some help with the double entry bookkeeping.

We used an invoice financing facility for part of the consideration, this sits with the acquired company. We used two elements of deferred consideration, one sits with the acquired company and one sits with us personally. The rest of the consideration is equity.

Given that the transaction was completed on a cash-free, debt-free basis, what would the pro forma balance sheet look like - how are we supposed to consider the various debits and credits?

 

Replies (6)

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By Ruddles
14th Sep 2023 16:50

Can your accountant not answer those questions?

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Replying to Ruddles:
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By _jamespatterson
15th Sep 2023 09:40

No, they have never really encountered transaction accounting before. Any help would be greatly appreciated.

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Replying to _jamespatterson:
Stepurhan
By stepurhan
15th Sep 2023 09:48

Find another accountant that does know how to deal with this.

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Replying to stepurhan:
By Ruddles
15th Sep 2023 09:54

And make sure that you make a better job of explaining to them who has done what.

Who is "we"?

You say that you bought a business and then talk about the acquired "company".

What equity have you handed over as consideration?

Whose pro-forma balance sheet?

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Replying to _jamespatterson:
John Toon
By John Toon
15th Sep 2023 11:37

_jamespatterson wrote:

No, they have never really encountered transaction accounting before. Any help would be greatly appreciated.

Whether they've been involved in a corporate finance transaction or not, the most remedial of accountants, with a modicum of training, should be able to figure out the accounting adjustments required! Granted there may be some technical issues to overcome, if deferred consideration is weird or a group reconstruction has occurred, but a qualified accountant will have access to technical helplines, for free, if they need assistance.

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Replying to johnt27:
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By David Ex
15th Sep 2023 12:14

stepurhan wrote:

Find another accountant that does know how to deal with this.

johnt27 wrote:

Whether they've been involved in a corporate finance transaction or not, the most remedial of accountants, with a modicum of training, should be able to figure out the accounting adjustments required!

Mindblowing! Would the OP stick with a doctor or solicitor who, when asked for professional advice, said “Dunno, maybe try a random anonymous internet forum”?

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