Hopefully you can help me, as this is doing my head in! I work for a company, or rather a bunch of companys run by a variation of the same directors.
Company A went into liquidation due to amounting unpayable debts. Company B has now started trading in the same premises and is basically continuing the operations. Due to the directors not wanting smaller companies they owed money to to go bust, and also so the new company could continue trading, they have carried forward a substantial amount of debt from the old company and are paying it from the new company.
My question is how do I show these carried forward figures correctly?
I was going to post all the outstanding invoices as one O/B on each Supplier Account dated to last year, obviously as it's a new company I can't post the TB of the old company as the opening balance of the new company.
So I was just going to date everything 30/9/11
CR Creditors Control Acct/ Supplier Account
DR correct nominal e.g Bar Purchases/Stationery etc
Would this be the right way of doing it, or should I still code it all to 9998?
The New co has nothing to do with the old co. From a legal point of view, and you shouldn't put the old debts through the ledgers of the new company. If you did, imho, it's basically money laundering. I can understand why the Directors would want to do this for commercial reasons but that doesn't make it correct.
If I was you, I'd refer to the Accountant and your Institute.
edit:
This is assuming the New Co didn't buy the Old Co and is "starting from scratch"
-- Edited by ADAS on Friday 28th of October 2011 03:17:48 PM
-- Edited by ADAS on Friday 28th of October 2011 03:24:50 PM
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Tony
Responses are intended as outline only. Formal advice should be sort from your Institutes Technical Department or a suitably qualified Accountant.
Balls! I was afraid you were going to say that. The director is under the impression that as its still operating out of the same 2 premises and as long as there is a paper trail its ok.
This is going to be a massive headache....
I'm guessing it's also not OK to get a new nominal code under Overheads for the Old Debts.
I'll speak to the accountant (when they have appointed a new one)
As they are 2 separate companies the New Co cant take over the Old Co debts and pay whatever ones the directors prefer to pay in order that trading links can be continued. That would effectively be given preference of one creditor over another which in a legal sense cant be done.
The liquidator should gather in funds and distribute to each in order that they are entitled.
Nothing stopping the new company setting up accounts with whatever suppliers they want but doubt a supplier would want to carry on trading with the directors if they have debts that went bad in another company the directors ran.
