Companies - Business Purchase 2013-14

ALWADI INTERNATIONAL SCHOOL
ACCOUNTING GRADE 12
NOTES
COMPANIES BUSINESS PURCHASE

It is important to distinguish between a company buying the assets of another business, and
the purchase by the company of that other business. A company may buy the assets of
another business which may then cease to trade. The customers of that other business
must find another supplier. That is very different from a company buying another business;
the company takes over the assets and liabilities of that business together with its
customers and carries on the trade of the business taken over. The distinction is important
because the purchase only of assets does not involve any payment for Goodwill; the
purchase of a business usually does involve payment for Goodwill. A Company often issues
shares to the owner of a business as payment. The shares may be issued at a premium.
Sometimes a sole trader or a partnership may decide to convert their business into a limited
company. This is done by forming a new company which purchases the partnership
business. Exam includes the following different type of questions:
A Company can purchase the business of a Sole trader (Sample answer 1).
A Company can purchase the business of a partnership firm (Sample answer 2).
A Partnership firm can convert its business to form a limited company (Sample
answer 3).
Two Partnership firms can combine their businesses to form a limited company
(Sample answer 4).
A Sole trader and a partnership firm combine their businesses to form a limited
company (Sample answer 5).
Goodwill
When a company purchases a business, it will usually buy the assets less the liabilities at an
agreed valuation. In addition, it usually pays for the advantage of acquiring an established
trade. The company does not have to build up a new business from nothing; the business
has been build up by the previous owner who will normally expect to be rewarded for his
efforts. Goodwill is the amount paid for the acquisition of a business in excess of the fair
value of its separable net assets. The term separable net assets is used to describe the
sale of the assets of a business and the settlement of its liabilities out of the proceeds
It is important to distinguish between purchased Goodwill and Inherent Goodwill.
Purchased Goodwill has been paid for. Inherent Goodwill has not been paid for and will
arise, for instance, if a trader decides that he wants to show the Goodwill of his business in
his Balance Sheet; he debits a Goodwill account in his books and credit his Capital account
with any amount that he wish to show as Goodwill.
Accounting Standard (IAS38) states that only purchased Goodwill should be shown in
company Balance Sheets and should be shown as an intangible non current asset. If the
amount paid for a business is less than the fair value of its separable net assets, the
difference is called negative Goodwill, and must be shown as negative amount among the
intangible non current assets in the Balance Sheet.
Page 1
ACCOUNTING GRADE 12
NOTES
Sample answer 1 (Company take over the business of a Sole trader):

Box Ltd. purchased the business of A. Smith, a sole trader, on 1st October 2011. Smiths
Balance Sheet at that date was:
Non current assets:
Property
Plant and equipment
Motor vehicles
Current assets:
Inventory
Trade receivables
Bank
(-) Current liabilities:
Trade payables
$
120000
70000
42000
232000
14000
8000
10000
32000
4000
28000
260000
Net assets
Financed by:
Smith Capital
260000
The assets and liabilities were taken over at the following values:
Property
Plant and equipment
Motor vehicles
Inventory
Trade receivables
Trade payables
$
160000
56000
32000
10000
6000
4000
Box Ltd. did not take over Smiths Bank account. Box Ltd paid Smith $300000, made up as
follows:
Cash $40000 and; 200000 Ordinary shares of $1 each
Box Ltds Balance Sheet at 1 October 2011 before it acquired the business of A. Smith was
as follows:
Non current assets:
Property
Plant and equipment
Motor vehicles
$
400000
150000
80000
630000
Page 2
ACCOUNTING GRADE 12
Current assets:
Inventory
Trade receivables
Cash & cash equivalents
NOTES
42000
32000
64000
138000

Trade payables
14000
Equity:
Ordinary share capital of $1
Retained earnings
124000
754000
600000
154000
754000
Required:
(a)
Prepare the journal entries in Box Ltds books to record the purchase of A. Smiths
business.
(b)
Prepare Box Ltds Balance Sheet immediately after the purchase of the business of A.
Smith.
Suggested Answer:
Goodwill
=
=
Purchase price - Net assets acquired

(Total assets Total Liabilities)
$300000 (264000 4000)
$40000
The shares were valued at $(300000 40 000) = $260000. $(260000 200000) = $60000 is
the share premium.
(a)
Journal
Dr
Cr
$
$
Goodwill
40000
Property
160000
Plant and equipment
56000
Motor vehicles
32000
Inventory
10000
Trade receivables
6000
Trade payables
4000
Cash
40000
Ordinary share capital
200000
Page 3
ACCOUNTING GRADE 12
Share premium account
NOTES
60000
(To record the assets and liabilities taken over by Box Ltd)
(b)
Box Ltd Balance Sheet at 1 October 2011 after the
acquisition of A. Smiths business
Non current assets:
$
Goodwill
Property (400000 + 160000)
Plant and equipment (150000 + 56000)
Motor vehicles (80000 + 32000)
Current assets:
Inventory ( 42000 + 10000)
Trade receivables (32000 + 6000)
Cash & cash equivalents (64000 40000)
Current liabilities:
Trade payables ( 14000 + 4000)
Net current assets
Net assets
$
40000
560000
206000
112000
918000
52000
38000
24000
114000
18000
Equity:
Ordinary share capital (600000 + 200000)
Share premium
Retained earnings
96000
1014000
800000
60000
154000
1014000
Purchase of a Partnership business:

The purchase of a partnership business by a company follows a similar procedure to that for
the purchase of a sole traders business. When one of the partners has made a loan to the
firm and the company takes the loan over, it is usual for the company to issue a debenture
to the partner concerned. If the rate of interest on the debenture is different from the rate
previously received by the partner on the loan, the amount of the debenture will usually
ensure that the partner continues to receive the same amount of interest each year as
previously. To calculate the amount of the debenture, find the capital sum which, at the new
rate, will produce the same amount of interest. Multiply the amount of the loan by the rate
paid by the partnership and divide by the rate of interest on the debenture, as shown in the
following example.
(i) Partners loan to partnership: $100000 at 9% interest per annum.
o
Annual interest = $9000.
Page 4
ACCOUNTING GRADE 12
NOTES
A 12% debenture producing annual interest of $9000 will be $(100000 X 9/12)

=$75000.
(ii) If in (i) the rate of interest on the debenture is 6% the amount of debenture is
$100000 X 9/6 = $150000 (Interest on $150000 at 6% per annum = $9000.)
In a partnership a Realisation account will have to be drawn up to calculate the profit or
loss on sale of the partnership business. The profit or loss on sale will then be shared
between the partners in their profit & loss sharing ratios.
The double entry needed in the partnership books is:

Debit
Credit
Step 1 Transfer assets being disposed of to Realisation account

a realisation account
Asset accounts
Step 2 Transfer of liabilities (if taken over

by the company)
Liabilities accounts
Realisation account
Step 3 Enter Purchase Price
Limited company
Realisation account
Step 4 Any Asset taken over by a partner
Partners Capital
Account
Realisation Account
Step 5 Credit balance on Realisation

account (Profit on Realisation)
Realisation account
Partners Capital
accounts
Partners Capital
accounts
Realisation account
Debit balance on Realisation

account (Loss on Realisation)
Step 6 Receipt of Purchase Price
Cash / Bank Ordinary Limited company

shares
Preference shares
Debentures
Convertible loan
stock
Page 5
ACCOUNTING GRADE 12
Step 7 Closure of Partners Capital

accounts
Partners Capital
accounts
NOTES
Cash / Bank Ordinary

shares
Preference shares
Debentures
Convertible Loan
stock
Sample answer 2 (Company take over the business of a partnership firm):

Arthur and Charles are partners in a business sharing profit and losses equally. Their
Balance sheet at 31 December 2011 is as follows:
Non Current assets:
Land and buildings
Fixtures and fittings
Office machinery
Current assets:
Inventory
Trade receivables
Bank
Current liabilities
Trade payables
Net current assets
$
100000
36000
24000
160000
34000
16000
8000
58000
(24000)
34000
194000
Non current liabilities:

8% Loan from Charles
Net assets
Financed by:
Capital accounts: Arthur
Charles
100000
70000
Current accounts: Arthur

Charles
5000
(6000)
(25000)
169000
170000
Page 6
ACCOUNTING GRADE 12
NOTES
(1000)
169000
The partners have accepted an offer from Craig Plc to purchase the business for $250000.
The company will take over all the assets and liabilities of the partnership except the bank
account. The partnership assets are to be valued as follows.
Land and buildings

Office machinery
Inventory
Trade receivables
$
120000
56000
40000
30000
12000
Craig Plc will settle the purchase price as follows:
A payment by cheque of $55000.

A further 10% Debenture issued to Charles to ensure that he continues to receive the
same amount of interest annually as he has received from the partnership.
The balance to be settled by an issue of ordinary shares of $1 in Craig Plc at $1.25 per
share.
Craig Plcs Balance Sheet at 31 December 2011 is as follows:
Non Current Assets:

Properties
Plant & Machinery
Motor Vehicles
Current assets:
Inventory
Trade receivables
Cash & cash equivalents
Trade payables
10% Debentures
Net assets
Equity:
Ordinary shares of $1 each
Retained earnings
$
200000
100000
30000
330000
40000
25000
120000
185000
(32000)
153000
483000
(50000)
433000
400000
33000
433000
Page 7
ACCOUNTING GRADE 12
NOTES
Required:
(a)
Prepare Partners capital Accounts.
(b)
Prepare Craig Plc Balance Sheet immediately after the company has acquired the
partnership business.
Suggested answer:
Note: Before we prepare Partners capital Accounts we need to prepare the Realisation
Account to find out the gain or loss upon business dissolution or taken over.
Workings:
Realisation Account
$
100000 Trade payables
36000 Craig Plc (Purchase price)
24000
34000
16000
Land and buildings

Office machinery
Inventory
Trade receivables
Gain on Realisation: (64000/2)
Capital accounts: Arthur
Charles
32000
32000
274000
$
24000
250000
274000
Partners Capital Accounts
Current account balance

10% Debentures
Ordinary shares (175000/2)
Bank
Arthur
$
87500
49500
137000
Charles
$
6000
20000
87500
13500
127000
Workings: Calculation of Goodwill

Assets taken over
Land and buildings
Office machinery
Inventory
Balance b/d
Current account balances
Loan from Charles
Gain on realization
Arthur
$
100000
5000
32000
137000
Charles
$
70000
25000
32000
127000
$
120000
56000
40000
30000
Page 8
ACCOUNTING GRADE 12
Trade receivables
NOTES
12000
258000
(24000)
234000
(-) Trade payables

Net Assets
Goodwill = Purchase Price - Net Assets
= $ 250000 - $ 234000
= $ 16000
Purchase consideration
(-) Cash
10% Debenture (25000 x 8/10)
Value of shares
$
250000
(55000)
(20000)
175000
No. of shares issued at $1.25 per share (175000/ 1.25)

Share premium (175000 140000)
140000
$35000
Craig Plc
Balance Sheet Immediately after the acquisition of
the partnership of Arthur and Charles
Non Current Assets:
$
Intangible: Good will
Tangible: Properties (200000 + 120000)
Plant & Machinery (100000 + 40000)
Motor vehicles
Current assets:
Inventory (40000 + 30000)
Trade receivables (25000 + 12000)
Cash & cash equivalents (120000 - 55000)
$
16000
320000
140000
56000
30000
562000
70000
37000
65000
172000
Page 9
ACCOUNTING GRADE 12
Trade payables (32000 + 24000)
Net current assets
NOTES
(56000)
116000
678000

10% Debenture (50000 + 20000)
Net Assets
70000
608000
Equity:
Ordinary shares of $1 each (400000 + 140000)
Share premium account
Retained earnings
540000
35000
33000
608000
Sample answer 3 (Conversion of a Partnership firm into a Limited Liability Company):

Angela, Belinda and Cindy has been in partnership for several years sharing profits and
losses in the ratio 3:3:2 respectively. At 30 September 2011 the firms Balance Sheet
showed:
$
Non current assets:
Current Assets:
Inventory
Trade receivables
Bank
(-) Current Liabilities:
Trade payables
$
200000
55000
41000
7000
103000
(33000)
70000
270000
(-) Non Current Liabilities:

10% Loan from Angela
Financed by:
Capital Accounts Angela
Belinda
Cindy
(60000)
210000
90000
80000
40000
210000
Page 10
ACCOUNTING GRADE 12
NOTES
On 1 October 2011, the partners decided to form a limited company, DEF Limited, to take
over the business of the firm. It was agreed that all the assets (except bank) and current
liabilities would be transferred to the company at the following values:
$
250000
50000
39000
30000
Non current assets

Inventory
Trade receivables
Trade payables
The purchase price of $325000 was settled as follows:
80000 11% Preference Shares of $1 each;

12% Debentures sufficient to give Angela the same income as she received from her
loan to the partnership and;
Balance remaining is to be covered through the issue of 150000 Ordinary Shares of
$1 each.
Required:
(a)
Calculation of Goodwill upon conversion.
(b)
Prepare DEF limited balance sheet.
Suggested Answer:
(a)
Goodwill
=
=
Purchase price - Net assets acquired

(Total assets Total Liabilities)
$325000 - $(250000 + 50000 + 39000 30000)
$16000
(b)
DEF Limited
Balance sheet as at 1st October, 2011
Non current assets:
Goodwill
Other non current assets
Current Assets:
Inventory
Trade receivables
$
16000
250000
266000
50000
39000
Page 11
ACCOUNTING GRADE 12
NOTES
89000
(-) Current Liabilities:
Trade payables
Net current assets
(30000)
59000
325000

12% Debentures (60000 x 10/12)
Net assets
(50000)
275000
Equity:
Ordinary shares of $1 each
11% Preference shares of $1 each
Share premium (150000 x 0.30)
150000
80000
45000
275000
Sample answer 4 (Two Partnership firms combine their businesses to form a Limited
Company)
Simon, Jones and Clark has been in partnership trading as SJM. They share Profits and
Losses in the ratio 2: 2: 1 respectively. Allen and Hinds have been in partnership trading as
A & H. They share Profits and Losses equally. At 31 May 2011 the summarized balance
sheets of both businesses were as follows:
Premises
Machinery
Motor Vehicles
Fixtures & fittings
Inventory
Trade receivables
Balance at bank
(-) Trade payables
(-) 10% Loan from Clark
Capital Accounts Simon
Jones
Clark
Capital Accounts Allen
SJM
$
210000
70000
55000
25000
20000
28000
17000
425000
(15000)
410000
(60000)
350000
A&H
$
140000
26000
5000
10000
18000
8000
207000
(12000)
195000
195000
175000
105000
70000
105000
Page 12
ACCOUNTING GRADE 12
Hinds
350000
NOTES
90000
195000
The partners agreed to form a limited company, SIGMA Ltd, to take over both businesses.
All SJM Assets were transferred to SIGMA Ltd with the exception of trade receivables and
balance at bank. The agreed values of assets taken over by the company are:
Premises
Machinery
Fixtures & fittings
The remaining vehicles
Inventory
SJM
$
270000
60000
20000
35000
18000
A&H
$
200000
20000
3000
10000
SJM collected $25800 cash from trade receivables. Trade payables accepted $14300 in full
settlement of amounts due to them. Costs involved in dissolving the SJM partnership
amounted to $12500. The three vehicles which have been used by the partners were taken
over by them as follows:
Partners
Simon
Jones
Clark
Agreed takeover price

$
10000
7500
2500
The Purchase Consideration for SJM was $480000 distributed as follows:

o
160000 8% Preference shares of $1 each to be distributed in Profit sharing ratios;
Sufficient 12% Debentures to give Clark the same return as he had received on his
loan to the partnership;
The balance as Ordinary shares of $1 at a premium of $0.25 per share distributed to

the partners in proportion to their Capital Account balances at 31 May 2011.
Costs to dissolve the A & H partnership were $6200. A & H collected $14000 cash from
trade receivables. Trade payables were paid the amounts due to them.
The Purchase Consideration for A & H was $270000 distributed as follows:
o
70000 8% Preference shares of $1 each to be distributed in profit sharing ratios;
The balance as Ordinary shares of $1 at a premium of $0.25 per share to be shared

equally.
Required:
Page 13
ACCOUNTING GRADE 12
NOTES
(a) Prepare Partnership Capital Accounts at 31 May 2011 for both businesses to show the
closing entries in both sets of partnership books of account.
It was agreed that the issued Ordinary Share Capital would be held as follows:
Simon
Jones
Clark
Allen
Hinds
30%
15%
15%
20%
20%
It was further agreed that the transfer price of any Ordinary share would be $1.25 per share.
Required:
(b) Calculate the Number of Ordinary shares received by each partner.
(c) Prepare a Balance sheet for SIGMA Ltd at 31 May 2011 immediately after incorporation.
Suggested Answer:
Premises
Machinery
Motor Vehicles
Fixtures & Fittings
Inventory
Discount allowed
Dissolution costs
Gain on Realisation:
Capital accounts: Simon (106 x 2/5)
Jones (106 x 2/5)
Clark (106 x 1/5)
(a)
SJM
Realisation Account
$
210000 Discount received
70000 SIGMA Ltd (Purchase price)
55000 Motor vehicle taken over:
25000 Capital Accounts: Simon
20000
Jones
2200
Clark
12500
$
700
480000
10000
7500
2500
42400
42400
21200
500700
500700
SJM
Motor vehicles
8% Preference shares
12% Debentures
S
$
10000
64000
-
J
$
7500
64000
-
C
$
2500
32000
50000
Balance b/d
Gain on realisation
Loan from Clark
S
$
175000
42400
-
J
$
105000
42400
-
C
$
70000
21200
60000
Page 14

Ordinary shares
Bank
108000
35400
217400
108000
179500
Premises
Machinery
Fixtures & Fittings
Inventory
Discount allowed
Dissolution costs
Capital accounts: Allen (78.8 x 1/2)
Hinds (78.8 x 1/2)
ACCOUNTING GRADE 12
54000
12700
151200
Bank
NOTES
32100
217400
179500
151200
A&H
Realisation Account
$
140000 SIGMA Ltd (Purchase price)
26000
5000
10000
4000
6200
39400
39400
270000
$
270000
270000
A&H
8% Preference shares
Ordinary shares
Bank
A
$
35000
100000
9400
144400
H
$
35000
100000
135000
Balance b/d
Gain on real.
Bank
A
$
105000
39400
144400
H
$
90000
39400
5600
135000
(b) SJM: Number of Ordinary shares (270000 / 1.25) = 216000

A & H: Number of Ordinary shares (200000 / 1.25) = 160000
Total number of Ordinary shares (216000 + 160000) = 376000
Page 15
ACCOUNTING GRADE 12
NOTES
Partner shares:
Simon (376000 x 30%) = 112 800 shares
Jones & Clark (376000 x 15%) = 56 400 shares each
Allen & Hinds (376000 x 20%) = 75 200 shares each
(c)
SIGMA Limited
Balance sheet as at 31st May, 2011
Non current assets:

Goodwill (77000 + 37000)
Premises
Machinery
Fixtures
Vehicles
Current Assets:
Inventory
12% Debentures (60000 x 10/12)
Net assets
Equity:
Ordinary shares of $1 each (216 +160)
8% Preference shares of $1 each (160 + 70)
Share premium (376000 x 0.25)
$
114000
470000
80000
23000
35000
722000
28000
(50000)
700000
376000
230000
94000
700000
Page 16
ACCOUNTING GRADE 12
NOTES
Sample Answer 5 (A Sole trader and a partnership firm combine their businesses to
form a Limited Company)
Wong was a sole trader. Gruber and Gupta were in partnership and did not have a
partnership agreement. Both of the businesses had been experiencing falling profits for a
number of years due to large supermarkets opening in their town. They agreed that GWG
Ltd be formed on 1 April 2008 to take over both businesses in order that they could better
compete with larger businesses.
The new company has an Authorised share capital of 500000 ordinary shares of $1 each.
The summarised balance sheets of Wong and Gruber and Gupta at 31 March 2008 are
shown.
Wong
Non Current assets at NBV:
Premises
Equipment
Current assets:
Inventory
Trade receivables
Balance at bank
$
16000
20000
36000
Gruber and
Gupta
$
50000
30000
80000
6000
3000
1000
10000
15000
11000
26000

Trade payables
Bank overdraft
Net current assets
Net assets
(4000)
6000
42000
(2000)
(5000)
19000
99000
Financed by:
Capital Accounts Wong
Gruber
Gupta
42000
-
40000
60000
42000
500
(1500)
99000
Current Accounts Gruber

Gupta
Profits earned over the past 5 years were:
Page 17
Year ended 31
March
2004
2005
2006
2007
2008
ACCOUNTING GRADE 12
Wong
$
29000
25000
17000
13000
11000
NOTES
Gruber and Gupta

$
55000
49000
42000
25000
19000
The purchase consideration had been agreed at 3 times the average profits for the past five
years. The purchase consideration was settled by each of Wong, Gruber and Gupta
receiving:
$25000 7% debentures (2028) issued at par, and
24000 ordinary shares of $1 each in GWG Ltd
Additional information:
1. Trade receivables and trade payables were not taken over by GWG Ltd. Wong and
Gruber and Gupta each undertook to collect their own debtors and pay their own
creditors.
2. Wongs trade receivables paid $2800 in full settlement and Gruber and Gupta collected
$10000 from their customers.
3. Wong paid his trade payables $3600 while Gruber and Gupta paid their suppliers in full.
4.
Wong sold his equipment for $18000 cash.
5. Costs of dissolution for Wongs business were $700 and for Gruber and Gupta $2100.
6. The remaining assets were taken over by GWG Ltd at the following agreed values:
Non current assets - Premises

- Equipment
Inventory
Wong
$
50000
5000
Gruber and Gupta

$
80000
20000
14500
7. Gruber and Gupta each have enough personal cash resources to make up any deficit
which may arise on their capital accounts.
Required:
(a) Prepare a realisation account, a bank account and a capital account to close Wongs
books of account.
Page 18
ACCOUNTING GRADE 12
NOTES
(b) Prepare a realisation account, a bank account and capital accounts to close the
partnership books of account.
(c) Prepare the balance sheet of GWG Ltd at 1 April 2008 immediately after the formation of
the company and before any other transactions had taken place.
[NOV 08 P4]
Suggested answer:
(a)
Premises
Equipment
Inventory
Discount allowed
Dissolution costs
Capital account: Wong
Debentures
Ordinary shares
Cash (bank)
Balance b/d
Equipment
Trade receivables
Wong
Realisation Account
$
16000 Cash / bank (equipment)
20000 Discount received
6000 GWG Ltd (Purchase price)
200
700
32500
75400
Wong Capital Account
$
25000 Balance b/d
32000 Gain on realisation
17500
74500
Bank Account
$
1000 Trade payables
18000 Dissolution costs
2800 Wong Capital
21800
$
18000
400
57000
75400
$
42000
32500
74500
$
3600
700
17500
21800
Page 19
ACCOUNTING GRADE 12
NOTES
(b)
Gruber and Gupta
Realisation Account
$
Non current assets
Inventory
Discount allowed
Dissolution costs
Capital account: Gruber
Gupta
Debentures
Ordinary shares
Bank
80000
15000
1000
2100
GWG Ltd (Purchase price)
7950
7950
114000
Gruber
$
25000
32000
57000
Trade receivables
Gruber Capital
(c)
114000
114000
Capital Accounts
Gupta
$
25000
Balance b/d
32000
Gain on realisation
9450
Bank
66450
Gruber
$
40500
7950
8550
57000
Bank Account
$
Balance b/d
10000 Trade payables
8550 Dissolution costs
Gupta Capital
18550
Gupta
$
58500
7950
66450
$
5000
2000
2100
9450
18550
GWG Limited
Balance sheet as at 1 April, 2008
Non current assets:

Goodwill (2000 - 500)
Other non current assets
$
1500
150000
151500
Page 20
ACCOUNTING GRADE 12
Current Assets:
Inventory
NOTES
19500
171000

7% Debentures
Net assets
(75000)
96000
Equity:
Ordinary shares of $1 each (24000 x 3)
Share premium
72000
24000
96000
Points to remember:
Goodwill is the difference between the values of the net assets acquired and the
purchase price.
Show Goodwill as an intangible non current asset, even if it is negative Goodwill.
When a debenture is issued to a partner, and the partner is to receive the same amount
of annual interest as he/she received before the sale of the firm; check that you have
calculated the amount of the debenture correctly.
If you are required to prepare journal entries in a companys books to record the
purchase of a business, do not show the entries in the books of the business being
taken over.
Show all the workings when preparing the companys Balance Sheet after the new
business has been acquired.
LAYOUTS
REALISATION ACCOUNT
$
$
Trade payables (if taken over by
Premises (at balance sheet values)

Plant & Equipment
xxx
xxx
company)
Other payables (if taken over by
xxx
xxx
Page 21
ACCOUNTING GRADE 12
NOTES
company)
Discount received (if partners take
Motor vehicles
xxx
responsibility)
Current a/c / Capital a/c (any assets
xxx
Investments
inventory
Trade receivables (if taken over by
xxx
xxx
taken over by partners)

Purchase price (company name)
Loss on realization
xxx
xxx
company)
Bank (if taken over by company)
Discount allowed (if partners take
xxx
xxx
Current a/c or Capital a/c
xxx
responsibility)
Bad
debts
(if
xxx
partners
take
responsibility)
Dissolution costs
Gain on realization -
xxx
xxx
Current a/c or Capital a/c
xxx
xxx
xxx
xxx
PARTNERS CURRENT ACCOUNTS
Balance b/d
Loss on realization
Drawings (assets taken
over)
Transfer to Capital account
A
$
xxx
xxx
B
$
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
Balance b/d
Gain on realization
Transfer to Capital account
A
$
xxx
xxx
xxx
B
$
xxx
xxx
xxx
xxx
xxx
PARTNERS CAPITAL ACCOUNTS
Page 22
Current account balance

Loss on realization
Drawings (assets taken
over)
Debentures
Convertible loan stock
Preference shares
Ordinary shares
Cash / Bank
A
$
xxx
xxx
B
$
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
xxx
ACCOUNTING GRADE 12
NOTES
Balance b/d
Current account balances
Partners Loan
A
$
xxx
xxx
xxx
B
$
xxx
xxx
xxx
Gain on realization Cash / Bank
xxx
xxx
xxx
xxx
xxx
xxx
Page 23

Companies - Business Purchase 2013-14

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