accounting for business acquisition

[Naseema]

Hi,

I am in the process of purchasing a little business, and was wondering what the accounting entries would be.

The business has just a few movable assets, like microwaves, etc; and lots of stock.
The purchase price is also less than the cost of the assets. There are no liabilities.

If it were the other way around, the difference would be goodwill.

Any ideas for this situation?

Many thanks.

[CLIVE-TRIANGLE]

The assets are at cost to you, which is the debit, while the credit is loan from you or bank, whatever the particular situation.

[Naseema]

Thanks, Clive. So i would actually record the assets at a lower cost than they really are, end up with a larger profit margin when these stocks are sold?

[CLIVE-TRIANGLE]

In a nutshell, yes. The only acceptable accounting treatment is to record the acquisition at actual cost to you. This is so for equipment as well as stock.