Company purchasing shares question

It would cause a decrease in assets (cash) with no change in liabilities.

Tony

The share capital is a liability. Either that liability would decrease, or the shares would become assets, and the sssets would increase to balance the expenditure.

Either assets and liabilities would both decrease, or both would stay the same, but the type of asset would change from cash to shares.

That must be true because I just read it on the Interweb thingy :-)

Tony

In this case the assets stayed the nominally the same.

The shares were a low value 1.00, but they were bought back at a greatly inflated value, I assume to reflect the value of the perceived company at the time.

I appreciate the help from both of you.

There's a lot of nonsense talked in this thread.

Anthony is right in the context of the question. If David was right every company would have net assets of nil.

Net Assets are the same figure as shareholder's funds, and these have been reduced by the corresponding purchase of shares.

Is this a good wheeze to make use of your capital allowance?

What do you mean by capital allowance?

The do. That is why a balance sheet, for a company with shares, balances. When the company floats the shares, the share capital becomes a liability, the the money raised becomes an asset.

Capital is not a liability!

From a double-entry point of view it has some of the characteristics of liabilities in that increases are credits and decreases are debits and so capital is placed on the right side of a balance sheet. Liabilities are obligations that must be paid when due or upon demand. In general individual members have no right to demand a return of their capital while their company continues to exist.

Tony

I meant personal capital gains tax allowance.