Tracking Company Purchase w/complication

The loan is a PERSONAL loan! The company cannot borrow money to buy itself. It looks like the purchaser purchased all the shares of the company for $25,000 and then injected $9,500 into the business. The fact that she borrowed $35,000 to do this does not make any difference to the company. There are a number of factors that will dictate how the transfer of ownership is recorded on the company books. The $9,500 may or may not be a shareholder's loan. You should engage the services of an accountant to detail the proper entries..

Gwen,

Do you have a copy of the actual Loan document? You need to know if the Loan was amde to the owners PERSONALLY, or if the Loan was made to the COMPANY. (They may have made the deposit to their personal AC even though the loan was in the company's name.)

If the Loan was indeed made to them personally, but you are making the payments out of the Company, then those Loan Payments are really Shareholders' Distributions or Loans TO the SH. The interest expense would not even be on the company's books...

So, start with that Loan Document...

I asked the company owner (Jane) and apparently there wasn't even a physical contract, nor did 25,000 even pass through her hands. Her mother wrote 25,000 directly to the previous owner of the company and 9500 to Jane. Jane indicated that her mother is not a shareholder and she is paying off the whole amount of 35,000 to her mother. I guess that makes it a complete personal loan by default. Which solves all my problems. Can I just call the payments for the loan an Owner Draw since every payment takes from the equity and is not an expense? I just want to make it easy for the accountant and I don't want to mess up their taxes.

Like I said before, I can't wait to start school in 2007 Fall...I have so much to learn. My husband bought me a book last night, so hopefully that will help for now as well.

PS THANKS FOR ALL ANSWERS, PAST AND FUTURE!!!!
Gwen Allen
Eudora Carpet LLC

to avoid any confusion at year-end, I would set up an equity AC called "Owner's Draw-Repay Loan", or something similar - to keep the loan payments totally separate from any other owner's draws. then, if the Tax Acct. wants you to re-clss these pyts, it will be easy to do so...Linda E. Freier
Certified QuickBooks ProAdvisor?

I AM LISTING AN EXISTING INVENTORY. I
WENT TO ADJUST INVENTORY AND ADJUSTED ALL THE ON GOING INVENTORY. ON MY BALANCE SHEET IT DID NOT CHANGE MY INVENTORY ASSET AMOUNT. PLEASE HELP ME TO FIX THIS.

When you performed your inventory adjustment, did you only adjust quantities? QB gives you multiple adjustment options:
1) adjust quantities without adjusting value
2) adjust quantities AND values
3) adjust values without adjusting quantities.

Verify your inventory adjustment included value adjustments, not just quantity adjustments, if you expected a change in the B/S Inventory account total.

Also, double check the DATE of the inventory adjustment and the DATE of your B/S to ensure a value adjustment would be included in the B/S.

Chris

The company purchase does not affect p&l. It affects the balance sheet items. Income and expenses affect the p&l.

The $35,000 loan I assume was made to the owner's mother, not the owner. Read the loan statement. Also read the closing statement of the purchase. This will help you set up the books.

You may also wish to obtain a new EIN, so as not to be responsible for prior owner's taxes if there is a problem in the future.

The owner needs a cpa to set up the books and take care of the dangling questions.