10-14-2005, 08:45 AM
It is a basic accountancy question
In company's books, you cannot show the purchase transaction as the transaction relates to the owner or holding company not the (purchased) company. The books of the company show the share capital of the company at all times. So you are incorrect, in so far, as to say that the GL is zero as there will be assets and liabilities at all times however small. (e.g. cash and corresponding owner's equity/share capital).
In the books of the buyer which is let's say holding company, you will have the purchase price of the company as the investment balanced by corresponding payment. If there is a different between the fair value of the net assets of the company and the purchase price paid, it will be treated as goodwill... although its altogether a separate discussion.
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http//s4.invisionfree.com/AccountingWorld/
In company's books, you cannot show the purchase transaction as the transaction relates to the owner or holding company not the (purchased) company. The books of the company show the share capital of the company at all times. So you are incorrect, in so far, as to say that the GL is zero as there will be assets and liabilities at all times however small. (e.g. cash and corresponding owner's equity/share capital).
In the books of the buyer which is let's say holding company, you will have the purchase price of the company as the investment balanced by corresponding payment. If there is a different between the fair value of the net assets of the company and the purchase price paid, it will be treated as goodwill... although its altogether a separate discussion.
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http//s4.invisionfree.com/AccountingWorld/
