Local Company Marshalls Bookkeeping Question

Local Company

Local Company

Can I buy merchandise from Marshalls with a company card and export this merchandise in Europe even Marshall doesn't issue an invoice on my company name, only a receipt with cc number and merchandise description?

Can I recover the tax for the exported merchandise bought on local company from Marshalls? Thank you so much for your advice!

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Aug 23, 2023
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starstarstarstarstar 		Accounting For Retail Purchases
by: BB

It seems like your question pertains to the purchase of merchandise from a retail store like Marshalls using a company card, followed by exporting it to Europe, and concerns about tax recovery without an official company invoice.

It's essential to consult with a local tax professional or legal counsel, as tax laws and import/export regulations vary by jurisdiction. However, here's a general outline that might assist you:

Purchase and Exportation: Buying merchandise from Marshalls with a company card is typically permissible. The exporting part depends on the country of origin, the destination, and the nature of the goods. Ensure you comply with the applicable customs regulations and import/export laws.

Invoice vs. Receipt: Having only a receipt without an invoice in your company's name may complicate matters when accounting for the purchase. The receipt may not be accepted as a valid business expense document in some jurisdictions.

Tax Recovery: Depending on the jurisdiction, you may or may not be able to recover the tax for the exported merchandise. Some countries offer a Value Added Tax (VAT) refund on exported goods, but this usually requires proper documentation.

Local Regulations: Since this involves international trade, you will need to be aware of both your local regulations and the regulations of the country you're exporting to.

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Buying Out Company Shares

We have a client who previously owned his company with his former wife. He owned 51% and she owned 49%. They were divorced in 2009 and he bought out her shares of the company. Cash was credited but we aren't sure what account to debit. Can you help?

Hi,

Thank you for your question. I believe the debit would be to Partner 2 Owner's Equity account which would then be closed out at the end of the year.

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Oct 10, 2023
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starstarstarstarstar 		Share Buyout
by: BB

When you're dealing with a situation like a buyout of shares due to divorce, it's crucial to get the accounting right. The scenario involves not just business accounting but potentially legal aspects as well. Here's my take on what you should consider.

Understanding the Transaction

Your client owned 51% of the company and bought out the 49% from his former wife. Cash was credited, indicating the money went out to buy the shares. Now, you're wondering which account to debit.

What to Debit

The common approach to such a scenario, which I've found to be useful, is to debit the "Equity" or "Owners' Equity" account. Specifically, you'd debit a sub-account within Equity that could be labeled something like "Former Partner's Equity" or "Bought-out Shares."

Why Equity?

1. **Reflects Ownership Change**: Debiting the Equity account properly reflects the change in ownership structure, showing that all equity is now concentrated in the hands of the remaining owner.

2. **Simplifies Record-Keeping**: This creates a paper trail that specifically identifies the cost of buying out the former partner, making it easy to reference in the future.

3. **Legal Clarity**: In a situation involving divorce, clear and accurate financial records are critical. By properly accounting for the buyout, you protect your client's interests.

Additional Considerations

1. **Documentation**: Make sure all legal documents related to the buyout, such as buy-sell agreements or divorce settlement papers, are duly noted in your accounting records.

2. **Professional Advice**: Due to the sensitive nature of this transaction, consider consulting a legal advisor alongside your regular accounting procedures to ensure all bases are covered.

3. **Consistency**: Whatever method you choose, be consistent in future accounting practices.

In a share buyout situation like this, you would generally debit an Equity account to reflect the purchase. It's crucial to document this accurately and consult professionals to ensure everything is above board.

If you've got more bookkeeping questions or face similar complex scenarios, feel free to ask. I'm here to provide clarity!

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Company Stock

If you invest a truck into a company in exchange for company stock what accounts do you use to journalize it and if you sell the truck what accounts do you use to journalize the sale?

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Aug 23, 2023
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starstarstarstarstar 		Accounting For Company Stock
by: BB

When you invest a truck into a company in exchange for company stock, you are essentially contributing a capital asset in exchange for ownership. The accounting for this would typically involve the following journal entry:

Investing the Truck for Company Stock:

Debit: Assets (Trucks) for the fair value of the truck.

Credit: Owner's Equity or Common Stock for the fair value of the truck.

When the truck is later sold, the journal entry would depend on the selling price in comparison to its book value (original cost minus accumulated depreciation).

Selling the Truck:

Debit: Cash for the amount received from the sale.

Debit: Accumulated Depreciation for the total depreciation on the truck.

Debit or Credit: Loss on Sale of Truck or Gain on Sale of Truck (if sold for less or more than book value, respectively).

Credit: Assets (Trucks) for the original cost of the truck.

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Construction Company

by Shannon
(Sedalia, CO)

Classify bike racks and park benches that we as the prime contractor have to pay for. For example would it be considered a Material, or a supply, or something else?

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Aug 23, 2023
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starstarstarstarstar 		Building Material vs Supply
by: BB

Bike racks and park benches that are being paid for by a prime contractor are typically considered part of the construction materials or capital improvements to a project. They may also fall under the category of "fixed assets" if they are intended to be permanent fixtures.

Here's how you might classify them:

Material: If they are integral to the construction or improvement of a structure, they could be classified as materials. This includes elements that are permanently attached and directly add to the value of the project.

Supply: If they are considered reusable or consumable items used in the construction process but not part of the permanent structure, they might be classified as supplies.

Fixed Asset: If these items are intended to be permanent fixtures and add to the long-term value of the property, they could be classified as fixed assets.

However, the exact classification might vary depending on the specific nature of the contract, the agreement with the client, accounting standards in your jurisdiction, and how these items are being used in the project. It is advisable to consult with a professional accountant or someone who specializes in construction accounting to understand the precise classification for these items in your situation.

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Limited Liability Company

How do I post the entries when one member of a LLC sells out for cash and one of the company vehicles? The other member wrote a company check to pay the cash portion. Thanks, Lori

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Aug 23, 2023
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starstarstarstarstar 		LLC Assest Distribution
by: BB

When one member of an LLC sells their interest in the company, and part of the compensation includes cash and a company vehicle, multiple entries are typically needed to accurately record the transaction. The exact entries can depend on various factors like the legal structure, the agreement between the members, the value of the vehicle, etc., but here's a general guideline:

Credit the selling member's capital account: This reflects the reduction of the selling member's equity interest in the LLC.

Debit the buying member's capital account: This reflects the increase in the buying member's equity interest.

Credit the cash account: Reflecting the cash paid.

Debit the vehicle account: Reflecting the removal of the vehicle from the company's assets.

Make necessary adjustments for gains/losses: Depending on the book value of the vehicle and the agreed-upon value for the selling member's interest.

Example Journal Entries:
Assuming the cash portion is $10,000 and the book value of the vehicle is $5,000:

Debit Selling Member's Capital Account $15,000

Credit Buying Member's Capital Account $15,000

Debit Cash $10,000

Credit Vehicle Asset $5,000

Please consult with a CPA or other accounting professional who is familiar with your specific situation and jurisdiction to ensure the proper accounting treatment, as laws and regulations may differ.

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Pre-Acquisition Retained Earning

by Kash
(Burlington)

Company A, an S Corp, has profit for 2010, while Company B, a C Corp, has a current year operating loss for 2022 and negative retained earnings carried forward from previous years. In September 2022 Company A wants to acquire Company B.

Can Company A utilize Company B's pre-acquisition 2010 loss and/or previous years' negative retained earnings against Company A's profit after the acquisition for tax benefits?

There is no reorganization, and the acquisition will include paying off stockholders, payables, and purchasing Company B's patent.

Would it be more advantageous for Company A to simply purchase the patent from Company B, close Company B, and bring the patent into Company A's balance sheet, either amortizing it or using Section 179?

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Aug 23, 2023
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starstarstarstarstar 		S Corp Acquisition
by: BB

Generally, in an acquisition between an S Corp (Company A) and a C Corp (Company B), the utilization of net operating losses (NOLs) and retained earnings from Company B against Company A's profits may be restricted by various tax laws and regulations. The rules for carrying forward and applying NOLs are complex, and the exact answer would likely depend on specific details of the transaction and jurisdiction.

Whether it's more advantageous to acquire Company B or simply purchase the patent would depend on various factors, including the price and value of the patent, the structure of the transaction, potential liabilities of Company B, and the specific tax situation of both companies. Utilizing Section 179 for expensing the patent or amortizing it over time might have different implications based on Company A's overall tax strategy.

Given the complexity of this situation, it's advisable to consult with a tax professional or legal advisor who can provide tailored guidance based on the specific circumstances of Companies A and B.

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Starting a Business With Loan to Company

by Chris
(South Africa)

I'm starting a business and just learning about setting up the chart of accounts etc. I was wondering if I start off the business with capital as a loan from myself (the owner), to which account do I post this loan or how do I record this amount as an opening balance?

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Two Party Check to Company and Vendor

by Ella
(NH)

We recieved payment for work done. The customer deducted amount owed to our vendor, and wrote a party check. I am not sure how to post this in quickbooks. I need to show that the vendor was paid.

Thank you for your time and help.

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