How do I record the purchase of an existing business as a journal entry?
The doctrine of historical recording (historicity) dictates that all Current and Non -assets and liabilities are reported at their ACTUAL purchase price at the time you purchased them. For instance you bought a piece of land at $60,000 in 2000 and it is worth 150,000 in 2010 you still report it s value at 60,000 in the books. In terms of recording In the G L record all items purchased as Debits and match this to an entry for Capital (OE) of the same total value as a credit entry. Likewise any further additions of capital are a credit to the Capital account and a debit to the relative asset account Entry note is ‘purchase of new business” Assuming your Australian if the items purchased where not done so to maintain the original business you may be subject to GST on the purchase of the business, if however you have bought the business to maintain the business in its form then NO GST is paid (recievable).(Must meet division 60 of the Goods and services tax act 1999 (Tax inputs guidelines)
