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jrjsheard
May 9, 2023
Question

Recording transfer of assets to limited company

  • May 9, 2023
  • 1 reply
  • 0 views

Hello.

We are incorporating an existing Sole Trade business into a Limited Company. We are primarily a retail shop and cafe. The new company has 2 directors - the previous sole trader and her partner. The business is being transferred as a going concern in its entirety.

We have opted to sell the assets (shop stock, equipment, goodwill etc.) to the new Ltd. Company. These assets have been valued. We understand that the Ltd Company should be invoiced for the value of the assets, and we have drawn up that invoice.

The Ltd. company cannot pay for the assets immediately. So we have set up a Director's Loan account - this currently only records the cash transfer made from the Sole Trader bank account to the new company.

We now want to record the assets which the company has been invoiced for but will remain a Liability for now.

I can't get my head around how this should be recorded as ?Journal Entries?. If anyone can walk me through the steps, I'd be very grateful!

 

1 reply

paul72
paul72
May 9, 2023

Hi @jrjsheard 

 

Reading through your post it sounds like you have a pretty good grasp of how the incorporation works - most people don't realise that a business can't just re-start as a Ltd Company, the value in the assets, order book, etc. have a value which must be accounted for.

 

Anyway, the Bill from the Sole Trader can simply be entered into QBO as any other & left unpaid (or partially paid) in your Accounts Payable.  If the Bill is likely to be paid off within one financial year, this is certainly the easiest option.  This way you can enter Bill Payments against it into QBO until the balance is cleared.

Even if the balance is going to be paid off over a year or two there is no real reason that the amount cannot stay in Accounts Payable in QBO.  It just looks odd if anyone looks at your end-of-year accounts & you have large AP value (but this can easily be adjusted at year end by your accountant).

 

If the cost is likely to be paid off over several years, you might prefer to Journal it to a Liability account - simply raise a Journal between the Liability Account & Accounts Payable, then go to Pay Bills & clear the Journal against the Bill.

 

Hope this helps.

    A
    Ashleigh1
    May 9, 2023

     Hello Jrjsheard, thanks for posting on the Community page, we would advise you speak to a trained and qualified accountants on how best to record this and if it is a journal entry what you need to enter on the journal exactly we are just technical support here and not trained accountants.  Or listen to what Pau72 has said in his post thanks. 

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