Purchase shares in ltd company

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A company has 100 shares at nominal value £1 made of 4 shareholders, A and B both have 10% each and C and D both have 40% each.

At later day, C and D wanted to buy back shares from A and B as they are going to be retired. Then C and D purchase shares from A and B at consideration £55K each to A and B and this cash paid out from company bank accounts. Please note all 4 shareholders are also directors.
My question is: how do I post journals on the accounts? ( this is not regarding to capital gain tax for shareholders A and B)

so when making payments out of the bank, I credit bank account of total £110K to buy shares from shareholders A and B. What is the other debit entry for this? Shareholders A and B no longer have DLA on the accounts.

Thank you for your advice

Replies (7)

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By Paul Crowley
24th Apr 2024 22:48

Who bought the shares?
Look at the paperwork.

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Replying to Paul Crowley:
By bkkservices123
24th Apr 2024 23:14

C and D bought the shares of A and B but instead of using their personal monies they used company monies to pay for shareholders A and B.

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By Ruddles
24th Apr 2024 23:07

Based on the information in the question

Dr each of C and D loan account £55k

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Replying to Ruddles:
By bkkservices123
24th Apr 2024 23:15

Thank you

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Replying to bkkservices123:
By FactChecker
24th Apr 2024 23:34

For the avoidance of doubt, you are clear I hope that:

* if you are reporting "C and D bought the shares of A and B but instead of using their personal monies they used company monies" via DLAs (i.e. C and D borrowed the money from the company), then those two individuals now owe the money to the company until it is repaid in one form or another.

This may have various potential tax impacts later.

Thanks (3)
By taxdigital
25th Apr 2024 08:35

As you may be the bookkeeper of the company, you should be instructed by the directors as to what is the nature of the payment made to the existing director/participators. We the AWeb readers may be able to provide you with all the possible answers in the world but only the directors can advise you whether it was a dividend, salary or loan.

Edit - may be 'suspense' accounts is an invention forced by circumstances of OP's type.

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Replying to taxdigital:
By bkkservices123
25th Apr 2024 08:57

Many thanks for your advice

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