Hi brendasage

If you want to do this as journal entry, it would be DR to the Asset and CR the payment method used for payment of assets.

Thanks for quick reply.  Well I forgot to mention that he took out a loan for most of it. He paid 5k out of pocket and the rest is bank loan.

brendasage

No problem. You can choose to credit what ever account has the 5k cash on hand and also credit the payable loan account for the remainder. Cheers!

LOL ok for some reason I was thinking it was more complicated.  Sorry!! 

It definitely should be more complicated than a single general journal entry. The loan has to be set up as a liability so it can be paid down each time a payment is made. Remember loan payments are usually blended, principal and interest. the Principal pays down the loan and the interest is an expense. The assets purchased should be divided in categories: furniture and fixtures, computers and office equipment, trucks, etc. so they can be amortized over a period of time. Consulting the accountant who assisted on the purchase, or would process the year end work, would be very beneficial as it is better to setup the books correctly at the beginning rather than pay to have them adjusted at the first year end.

EXACTLY! I knew all of that.  I am waiting back from the client to find out a bit more information, but from what I suspect he took the loan so I will be doing the following: 

DR: Furniture & Fixtures (ASSET) lets say 20k

CR: Loan Payable 20k

DR: Truck (ASSET) 35k

CR: Loan Payable 35k 

That should equal the 55k loan that he needs to pay back.  

Now he did put 5k down on the loan so of course I would DR Loan payable and CR: shareholder

Now I'm not sure what the loan payment is each month but I always ask if they can break it down with the bank so that there's two payments coming out, one for the loan and one for the interest. 

Thanks for everyones help. 

Could someone advise if this is correct please?  He bought the business for 55k

So I debited Bank Loans 55k

Credited assets, so 5 went to furniture, 20 goodwill, 24500 veh and 5500 went to due to shareholder since he put money down..that equals 55k.............is that correct?  

I need to make another transaction to debit due to shareholder and credit bank loan because the bank loan is only for 49,500..

would that now be correct?

On a purchase of a company the assets should total the full value of the purchase - 55,000.

To pay for the purchase you have a bank loan of 49,500 plus shareholder loan of 5,500

To set up the bank loan you would debit the bank and credit Bank Loans Payable

To set up the purchase you would debit assets and credit bank and shareholder loan

To increase assets it is a debit to the account and to increase liabilities (loans) it is a credit to the account.

On a purchase of a company the assets should total the full value of the purchase - 55,000.

To pay for the purchase you have a bank loan of 49,500 plus shareholder loan of 5,500

To set up the bank loan you would debit the bank and credit Bank Loans Payable

To set up the purchase you would debit assets and credit bank and shareholder loan

To increase assets it is a debit to the account and to increase liabilities (loans) it is a credit to the account.