If a sole proprietorship is purchased for cash,... | JAMB UTME - Principles of Accounts - 1999

Question 1 Report

If a sole proprietorship is purchased for cash, then?

the purchaser debits his business purchase account with the consideration he pays

all assets and liabilities must be bought

goodwill results where value of assets

the vendor debits his business purchase account with the considerstion he receives

Answer Details

If a sole proprietorship is purchased for cash, the purchaser debits his business purchase account with the consideration he pays. In a sole proprietorship, the owner and the business are considered as the same legal entity. When the business is purchased for cash, the buyer needs to record the transaction in his books of accounts. The buyer needs to debit his business purchase account with the amount paid as consideration for the purchase. This will increase the value of the assets of the buyer's business. The vendor, who is selling the business, will credit his business purchase account with the consideration he receives.

Read lesson note on The Final Accounts Of A Sole Trader (JAMB)

The Final Accounts Of A Sole Trader

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If a sole proprietorship is purchased for cash, then?

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