When a business is taken over as a going concern, where are the assets and liabilities at the date of takeover first recorded?
Question 1 Report
When a business is taken over as a going concern, where are the assets and liabilities at the date of takeover first recorded?
Answer Details
The correct answer is the general journal.
When a business is taken over as a going concern, the opening entry records all the assets acquired and all the liabilities assumed, with the difference representing the capital or goodwill. This is a non-routine transaction that does not fit into the cash book, purchases journal, or sales journal. The general journal is used specifically for such opening entries, as well as for other non-routine transactions like corrections of errors, writing off bad debts, and year-end adjustments.
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