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Simple English definitions for legal terms
purchase accounting method
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A quick definition of purchase accounting method:
Purchase Accounting Method: A way of recording financial transactions when one company buys another company. It helps to determine the value of the assets and liabilities of the company being bought.
Purchase Agreement: A contract that outlines the terms and conditions of a sale. It is used when one person or company is buying something from another person or company.
Purchase Money: The first payment made when buying property that is secured by a mortgage. It is the money that the buyer puts down to start paying for the property.
A more thorough explanation:
The purchase accounting method is a way of accounting for a company's acquisition of another company.
When Company A buys Company B, they use the purchase accounting method to record the transaction. This involves adjusting the assets and liabilities of Company B to their fair market value at the time of the acquisition.
A purchase agreement is a legal contract between a buyer and a seller for the sale of goods or services.
When a person buys a car from a dealership, they sign a purchase agreement that outlines the terms of the sale, such as the price, payment schedule, and any warranties or guarantees.
Purchase money refers to the initial payment made on property that is secured by a mortgage.
When a person buys a house, they typically make a down payment as purchase money. This payment is used to secure the mortgage and is usually a percentage of the total purchase price of the property.