Quote (Icyfear @ Oct 29 2017 03:16pm)
But that's assuming only the business point of view matters.
When someone acquires equity, that's very much a positive asset to them. Debt / liabilities can be incredibly accretive in value as well. As such, everything is kept in a positive account by default, because accounting was created to serve as a record for all parties (standalone business, lenders, equity holders) when they reference the business they're interacting with.
Sure, but the person's acquisition of the business is separate from the business's books.
On the business side, if we simplify:
DR/increase in Cash
CR/increase in Equity
The person is not a business, so we don't apply the same logic. If it is the person's business that is acquiring equity in another business, then we can apply the same logic, but it ends with the person's interest in their own corp.
The person does acquire something real. They acquire the equity. But that's just it: The equity is a debt to that acquirer, from the business's point-of-view. From the person's point-of-view, it's a share of the business: a share in profits, and a value that can be cashed in on if sold/settled. While it is positive to the buyer, it is negative to the business.
This post was edited by Canadian_Man on Oct 29 2017 04:27pm