Accounting treatment of Business Acquisition Treatment

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Ajay S.Yadav (Querist)

28 June 2016 Dear Experts, In a private Company there is conflicts between two directors, so one of the director has given Rs. 7 Crore to another Director for Takeover of Business. So I want to Know the Accounting treatment as well as Journal Entry of the transaction. Second doubt is, to pay this Rs 7 crore Purchasing Director has taken loan from Bank on his name by Mortgaging his personal house. Now on 01/04/2015 he transferred the loan on the name of Company, what will be the journal entry for that & accounting treatment of Interest, whether it is to be capitalised or charged to Revenue? Please help me out .

CA Saurabh Singh

CA Saurabh Singh (Expert)

28 June 2016 Hi Ajay,
Are the two directors also the only directors with the company and the only shareholders of the company.
Please clarify the above.

Ajay S.Yadav

Ajay S.Yadav (Querist)

28 June 2016 Yes sir the Two directors an their wife's are the only director and shareholder of the company.

CA Saurabh Singh

CA Saurabh Singh (Expert)

28 June 2016 Now you are just acquiring the shares of the company , the following entry would be made in your books
Investment in shares(the shares you tooked of the director)
To Bank
and in books of company no treatment as the sharecapital remains the same only % of ownership has been transferred

Ajay S.Yadav

Ajay S.Yadav (Querist)

29 June 2016 but the payment to another director is made from company. Director who has taken over the business paying the consideration to another Director by taking loan on the name of the company

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