How do I post the start-up loan for the business I purchased?

This is odd...we got a Futures Development loan to purchase a business. We never actually received any funds, funds went directly to the old owner.


So when I set this up, I credit the Loan Payable but what is my debit?

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Anne,

Thanks for your question! It's a good one!

When you purchased your business, did you receive anything tangible? For example a storefront, or maybe inventory, or equipment? That would be your debit. Whatever assets you received. And you would record those assets at market value. Did you prepare a Purchase Agreement? That document should specify what assets were purchased.

If you didn't receive anything tangible like inventory or equipment, did you receive maybe a customer list? Like for an insurance agency, for example. That would be your asset then.

You may have paid more than these assets are worth, and that's when we get into the concept of "Goodwill". If you purchase an ongoing business, you purchase something intangible, a name, a customer base, and good feelings towards that business. That's Goodwill.

If you need some help with the numbers, let me know.

Thanks again for visiting the site!

Kathy

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