Hi Rachel
The double entry for the stock that was bought when the company is a little more complicated.
You need to establish the purchase price of the company.
You will then have to create an opening balance journal debiting and crediting all the opening balance on the purchases you should then be left with an debit balance this is posted to Goodwill.
E.G.
I pay £10,000 for a business buying Fixtures Fittings of say £3,000.00 Stock of say £5,000.00
In My opinion the double entry would be
DR Goodwill £2,000.00 DR Fixtures £3,000.00 Dr Stock £5,000.00 CR Capital Introduced £10,000.00
As always if you are dealing with a limited company this does get a bit more complex i.e. dealing with the capital introduced you would have to speak to thier accountant who dealt with the purchase of the business to ensure the correct split of Share Capital, Share premium and DLA.
This means the companies opening balance sheet as at the start of trading will be correct.
The reason I would not use the 5200 opening stock code is that when you bought the company you bought it's assets one of which was stock.
However this really does depend on how the eveything was bought as to how you would treat it.
In this instance I would point you squarely at their accountant.
I hope this make sense
Kind regards Stuart
Edited at 19 Sep 2011 08:46 AM GMT
Edited at 19 Sep 2011 08:57 AM GMT
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