Depreciating a company car

sarahwilsonsarahwilson Experienced MentorPosts: 567Registered
We have a company car that is paid for on HP, its just come to light we do not put any figure for depreciation into the accounts for it. Ultimately it will belong to us when the final payment is made.

I think we should be making a provision for depreciation relating to it, am I correct?:confused1:

Comments

  • Faye007GingerFaye007Ginger New Member Posts: 8Registered
    There should be a certain amount of depreciation going through each year to compensate for the final value of the car once it has been fully paid for. Does this help?
    xx Faye xx
  • GianniGianni Feels At Home Posts: 99Registered
    Has the car been capitalised? For example, is it showing as a non-current asset at the moment?
  • Faye007GingerFaye007Ginger New Member Posts: 8Registered
    Gianni, even if the car had been bought on hp or not, wouldn't it become a fixed asset, therefore making it capitalised?
  • GianniGianni Feels At Home Posts: 99Registered
    No, if it was on an operating lease for example it would not be capitalised as the car would never belong to the company.

    Even if it's on HP (finance lease), since it's not being depreciated, it suggests to me it may not have been capitalised - even though it should have been. I of course could be wrong in which case a depreciation charge needs to be put through inline with company policy.
  • Faye007GingerFaye007Ginger New Member Posts: 8Registered
    hee hee I'm confused now. I always thought that if you had a company car, that you bought or was on hp, which was going to be the company's in a few years time, or when the company paid it off, ~ then there should have been depreciation as the car wouldn't be of the same value five years down the line after the first payment for the car. Make sense? :confused1:
  • sarahwilsonsarahwilson Experienced Mentor Posts: 567Registered
    I don't know whether its been capitalised I shall have to check.:blushing: I thought what you are all saying, that it should have been capitalised and then depreciated in line with company policy. Ah I am not as daft as I look!!
  • garry_coombsgarry_coombs Well-Known Posts: 108Registered
    I would say treat the car as owned (as it will be once its paid off) so depreciate it in the accounts at something like 25% or 33% Reducing Balance.

    Then treat the HP as asort of loan seperately, this way you would be accounting for both the asset and the liability in the accounts fully.
  • jorja1986jorja1986 Well-Known Posts: 210Registered
    IT has to be depreciated inline with company policy not one way or th other you can not choose as the company SHOULD have a proper policyfor depreciation.

    Like Gary said the sections of the lease have to be accounted for seperately.
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