Purchase Of An Item With Finance

We have purchased a new vehicle and borrowed money to fund it.  How do we record it against the General Ledger code.   How can I record this?

Solution

For the recording of a new vehicle (or piece of equipment) or any similar item we recommend using a Cashbook Payment.  This will record the GST correctly. 

In this example below the entire purchase has been funded by UDC Finance, it can also be used for a Bank Loan, this is added as a Negative entry to the Loan Account.

If a Deposit has been paid then reduce the value coded to the Loan Account accordingly.  This in turn update the Payment Amount to reflect the funds going out.

 

You can see the Balance To Distribute is zero but the GST is recorded correctly.

The amount of the loan is the net value and does not include interest and charges.  This can be added as well by Debiting an account in the Balance Sheet called Interest in Advance and crediting the Loan Account.

A monthly Journal should then be created to Debit Interest on Finance and Credit the Interest In Advance.  This will expense the interest on a monthly basis.

Key words: Ute, Vehicle