Company purchasing Shares - Accounting Treatment

bigmuggsy

Hi

Company A is part of a group of companies.

During the 2012 years its purchased £51000 worth of shares in another, unconnected company.

Having not prepared accounts of this nature before what would be the accounting entry in the P&L/BS for this purchase?

Any advice be much appreciated.

Regards


Mike

Steve Collings

Hi

Assuming the investment is long-term, then you would credit bank and debit fixed asset investments in the balance sheet.

If Company A owns more than 50% of the investee, the investee becomes a subsidiary and therefore the results of the investee will be consolidated with the rest of the group (assuming group accounts are being prepared). The investment in Company A's balance sheet will then be removed on consolidation and form part of the goodwill calculation.

Kind regards

Steve

bigmuggsy

Thank you for taking the time to answer, much appreciated.

Mike