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JenniferWang · Sep 14, 2010, 02:31 PM

If someone suggests to trade his part of A/P as his company shares. Then shares times shares' market value to balance off partial A/P.
Do you know how it is posted in the book?
Thank you.

morgaine300 · Sep 14, 2010, 04:14 PM

Who is who? I'm confused. Who has the A/P, this guy owes the company or company owes him. It sounds like you're saying he owes you - you said "his part" of the A/P like he owes you. You can't trade that for shares in the company. So are you really talking about A/R? You need to keep all references on one side: the company's. How is this working from the company side?

JenniferWang · Sep 14, 2010, 10:36 PM

Sorry for the confusing. I do talk about that the customer owes our company money. We did a job at the propery which is a commercial property. The owner of the property who would like to trade his company ' shares to pay back the work we have done at this property. Does this make sense now?
Thank you for the reply.

morgaine300 · Sep 14, 2010, 11:05 PM

It sounds like the customer owes you, but is paying you with shares in his company. i.e. your company is getting the shares of ownership.

Depends on the percent of the shares cause different rules can apply. If you're talking under 20% of the shares, and under a basic assumption that this is not enough to put you in any type of influential position, then just debit something like Investment in XZY Co. shares at the market value, and credit the same amount out of the receivable. And use whatever the current value was at the time you do the actual transfer of the shares.

The investment account is an asset, but how you sub-classify it depends on what you're intending on doing with it - i.e. like keeping it around for a while, or trading it off quickly, etc. That also will influence how you will have to handle the value of at the end of the year.

Now, if you own more than 20% and will end up with some kind of influential position because of it, or worse, more that 50% that's a controlling interest, then you've got a completely different situation. In which case, you need to report back in and ask about that.

It can also make a difference if this is an S corp. If so, you will then become, for tax purpose, like a partner.

You didn't know this was going to get complicated, huh?