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How to book the purchase of an existing business news.sbcglobal.net 09-24-2006
Posted by news.sbcglobal.net on September 24, 2006, 12:09 pm
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 Good morning,

A quick question (I hope). My business recently purchased another business
for $5000, approximately $1500 or which was for equipment. What account
would I charge the remaining $3500 to? Would it be an expense account or an
owner investment (since the money came from the existing business to buy the
new business).

Thanks!



Posted by Joanne on September 24, 2006, 1:05 pm
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> Good morning,
>
> A quick question (I hope). My business recently purchased another
> business for $5000, approximately $1500 or which was for equipment. What
> account would I charge the remaining $3500 to? Would it be an expense
> account or an owner investment (since the money came from the existing
> business to buy the new business).
>
> Thanks!

An amortizable fixed asset called Goodwill unless there is something you
didn't mention..

It would be a good idea to talk to your tax preparer about this type of
question.

--
Sincerely,
Joanne

If it's right for you, then it's right, . . . . . for you!!!

http://www.jobird.com



Posted by news.sbcglobal.net on September 24, 2006, 3:29 pm
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Thanks Joanne. I will contact my tax preparer just to make sure. I
appreciate the advice.

>
>> Good morning,
>>
>> A quick question (I hope). My business recently purchased another
>> business for $5000, approximately $1500 or which was for equipment. What
>> account would I charge the remaining $3500 to? Would it be an expense
>> account or an owner investment (since the money came from the existing
>> business to buy the new business).
>>
>> Thanks!
>
> An amortizable fixed asset called Goodwill unless there is something you
> didn't mention..
>
> It would be a good idea to talk to your tax preparer about this type of
> question.
>
> --
> Sincerely,
> Joanne
>
> If it's right for you, then it's right, . . . . . for you!!!
>
> http://www.jobird.com
>
>



Posted by HeyBub on September 24, 2006, 6:34 pm
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news.sbcglobal.net wrote:
> Good morning,
>
> A quick question (I hope). My business recently purchased another
> business for $5000, approximately $1500 or which was for equipment. What
> account would I charge the remaining $3500 to? Would it be an
> expense account or an owner investment (since the money came from the
> existing business to buy the new business).
>
> Thanks!

It's usually placed in the completely fictious account called "Goodwill."
You can amortize or expense. The choice (usually) is made based on your tax
situation. If you made a big profit this year, you expense. If you lost
money this year you amortize. Your tax expert can best advise you on which
is appropriate.



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