Disposal + purchase on credit - Help!!!!

numberjunky

This question is really doing my head in and I sure would like some help.
Here's the scenario -

Company buys new van by trading in old van and purchasing new one on credit. It involves VAT and vehicle licence fee too and I'm really stuck on the entries to make.

The all important figures are.

Old van value at cost - 10500
Prov for Dep'n - 7000
New van cost - 12000
VAT - 2100
Van road tax - 140
Trade in - 2500

(total due after trade in - 11740)

Journal entries I have so far are -

Motor vans a/c CR 10500
Disposals DR 10500

Prov for Dep'n DR 7000
Disposals CR 7000

Now it starts to get dodgy.....
Motor vans DR 2500 (the trade in)
Disposals CR 2500

Now with a cash deal, there would be a DEBIT to Motor vans and CREDIT to Bank, but with a CREDITOR involved I am stuffed - how do I deal with the £140 road tax and VAT?

Over to you guys!

CJC

You might find «my notes» on this helpful.

Basically, it's not really different from a cash transaction. You just need an account for the vendor - either a specific account or a general 'Sundry Creditors' account which you'd use in place of the Bank a/c.

As for the VAT and Road Tax they both get credited to the vendor's account and debited from the VAT and Road Tax expense accounts.

numberjunky

Thank you so much Chris. I was nearly there but just lost way way on a couple of entries....

What was I worrying about...??