Journal Entry for Acquisition of MAX Business

The acquisition of a business involves taking over its assets and liabilities. In this case, the business of MAX has been acquired for cash 50000, and the following assets and liabilities have been taken over:

- Stock of goods:15000
- Cash:25000
- Machinery:8000
- Land:10000
- Debtors:7000
- Creditors:15000

The journal entry for the acquisition of MAX business will be as follows:

Date Particulars Debit Credit
[Date] MAX Business Account Dr. 50,000
To Cash Account 25,000
To Stock of Goods Account 15,000
To Machinery Account 8,000
To Land Account 10,000
To Debtors Account 7,000
To Creditors Account 15,000

Explanation:

In the above journal entry, the MAX Business Account is debited with the amount paid for the acquisition of the business. The various assets and liabilities taken over are credited to their respective accounts.

- Debit: MAX Business Account: This account is debited with the amount paid for the acquisition of the business. It is an expense account and represents the cost of acquiring the business.
- Credit: Cash Account: This account is credited with the amount of cash paid for the acquisition of the business. It is an asset account and represents the cash on hand or in the bank.
- Credit: Stock of Goods Account: This account is credited with the value of the stock of goods taken over. It is an asset account and represents the value of the goods held for sale.
- Credit: Machinery Account: This account is credited with the value of the machinery taken over. It is an asset account and represents the value of the machinery used in the business.
- Credit: Land Account: This account is credited with the value of the land taken over. It is an asset account and represents the value of the land used in the business.
- Credit: Debtors Account: This account is credited with the value of the debtors taken over. It is an asset account and represents the amount owed to the business by its customers.
- Credit: Creditors Account: This account is credited with the value of the creditors taken over. It is a liability account and represents the amount owed by the business to its suppliers.

In conclusion, the acquisition of a business involves taking over its assets and liabilities, and the journal entry for the same records the various accounts involved in the transaction.

Cash dr 25000
stock. dr 15000


machine dr. 8000


land. dr. 10000


debtors dr. 7000


to creditors. 15000


to capital. 50000