Purchasing Shares in a company

Mike Jefferson

Hi all,

Wondering if someone could help me to get my head around what or even if any entries need to be made in the accounts for the following:

My client (an individual) bought 100 ordinary £1 shares (100%) in company A:

The agreement was £5,000 cash up front plus 10% of turnover each year until a further £20,000 has been paid. Is there any transactions in the accounts of company A for this or is it a transaction between the my client and the old owners and thus does not affect the accounts. Share premium, £20k liability, Cap introduced?

To make things confusing. At the date of sale the company had debtors of £4,435 and creditors of £5,325 so net liabilities of 890. Now the old owners received the cash for all of the debtors and paid off all of the creditors with it (inc. the excess) so what is the entry to eliminate these from the accounts and what happens with the 890 excess that was paid by the old owners.