I am so lost. We've purchased a business but basically closed it and are starting another in its place. We are taking over some of the accounts receivable from the old company. We also have a loan with the prior owner to pay for the business. I want to add A/R from the old company to the total amount of the loan we have with him. I then need to be able to receive payments for the A/R. The biggest problem is that there is no set amount. His books were such a mess that right now, I am receiving checks and have no clue how to post and deposit them.
PROBLEM 2: (or really a much higher #. ) The accountant wants a value on tangible property for the company but we have a lot of inventory and tools, etc to account for. Am I horribly wrong to set up past owner as a vendor and receive in each of these items from him -giving each item a cost and then later "paying" for them from a loan account in his name? I'm just making up numbers here. Let's say we owe 100k for the company and end up with 80k in tangible property (inventory, tools, vehicles, etc). I'll need to make up the difference.
NOW BACK TO PROBLEM 1: First, I need to take in some of his past A/R. Which we will end up owing him in addition to the 100k. It goes on top of that loan.
Bottom line: How to put into QB the A/R and receive the money?
The accountant is correct, you need to list all assets and determine a fair market value for each if there is no establish cost you can determine.
set up the loan as a liability account, zero balance
You can add a/r several ways, I prefer create a customer called old create a service type item called old-ar, and link it to the loan liability account create an invoice for the old customer, use the old-ar item and enter the total amount of a/r then receive partial payments against that one invoice as checks come in
each asset you enter, the offset account is the loan liability account, ie fixed asset truck, debit $$$ loan liability, credit $$$
when you are done, subtract the total in the loan liability account from the amount of the loan and make a journal entry ( assumes the loan is more than the value in the liability account, if it is not then the costs of assets (your choice) need to be adjust down) debit an asset account named goodwill for the difference credit the loan liability for the same amount
Yes, there is a Set Amount for that open AR; it has to be part of the buy/Sell, just like any other asset you acquired.
This is not Customer AR, because it is not your Unpaid Sales. That is a different AR. What you Bought is the right to collect indebtedness, as Other Current Asset. Not as AR.
The Buy/Sell lists open AR as $50,000 so you use $50,000 as the Debit Balance to Other Current Asset = Receivables.
Then, make an Other Charge Type item linked to that account and use it on a Sales Receipt when you get paid, with no Customer name top left, but you can put something in the Bill To Block, to document who paid, if that matters. Otherwise, you would simply enter this as part of Deposits, to Other Current Asset.
Yes, you are Wrong to pretend to Buy all of this from that Vendor name. This is not AP.
"Let's say we owe 100k for the company and end up with 80k in tangible property (inventory, tools, vehicles, etc). I'll need to make up the difference."
It's all part of the initial entry. Example:
Debit Other Current Asset = the receivables
Debit Other Asset = the Stuff you obtained at the agreed upon value in the buy/sell, even if you are the person to Portion it out and assign it
Credit Liability for the debt balance owed to the seller
The Difference is often "good will" intangible asset.
"NOW BACK TO PROBLEM 1: First, I need to take in some of his past A/R."
Your Other Current Asset = already tracked as an amount Owed to you. If you collect more, that makes it Income.
"Which we will end up owing him in addition to the 100k."
You don't owe him his own AR, if you bought it along with the other assets and liabilities. You Bought the right to collect, and you Owe him from the Liability account. Don't confuse these two.
"It goes on top of that loan."
No, it starts out already taken into consideration. Things don't change as you go; you have the buy/sell. The buy/sell is not a Moving Target.
Rustler, if you were here, I'd hug you. The A/R has been a huge issue. I dont consider myself unintelligent but this accounting stuff has made me feel like ttying my shoes is over my head. I did not think my post went through so I took a shot at it myself. I had done exactly what you told me to do! I've gotten so much wrong (I do know how to fix my mistakes that Im aware of) that getting one thing right just made my day. Thank you!