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    TGeorge223's Avatar
    TGeorge223 Posts: 1, Reputation: 1
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    #1

    Jun 9, 2009, 01:42 PM
    Collection of another's accounts receivable.
    My client will purchase the common stock of a corporation. He has agreed that the seller will retain ownership of the accounts receivable on the balance sheet as of the closing date. When the cash comes in, the corporation will debit Bank Account and credit Accounts Reveivable. Quaere : What account will be debited when the corporation remits to the seller ?

    Tim George
    ArcSine's Avatar
    ArcSine Posts: 969, Reputation: 106
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    #2

    Jun 9, 2009, 02:56 PM
    Tim, if the seller is taking legal ownership of the receivables at closing, then the corporation should record a distribution of those receivables to the seller at that time. It really just amounts to a dividend of property rather than cash.

    Otherwise, after the closing you'd have the corporation continuing to show on its Bal Sheet an asset it doesn't own.

    Assuming the customers aren't notified, and they continue to make their remittances to the corporation, the corp just debits Cash and credits a Payable (it's just holding the money momentarily for the seller), and then clears off the Payable when it forwards the collected cash on to the seller.

    Regards,

    ...it was early and I was full of no coffee...
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