Home For everyone Chat and off-topic discussion

HP Agreement

columbiacolumbia Experienced MentorRegistered Posts: 580
Hi All

My mind has totally gone blank and I appear to be going round in circles today!

I am inputting some very late accounts and there is a HP agreement. It is made up of £22995 for the purchase of a Taxi and £7136.00 for the interest element.

I am using Sage so I assume I debit motor vehicles with £22995, credit Hire purchase with £30131.00 (both on the balance sheet) and debit HP interest with £7136 on the P&L.

When I make the monthly payments from the bank I know that I would credit bank, debit Hire purchase on the balance sheet with the monthly payment less the interest amount, but do I need to set up another balance sheet account to Debit the HP interest to?

Like I said, total brain freeze so help very much needed!!!




  • stevefstevef Well-Known CarmarthenRegistered Posts: 258
    Not a sage user,

    But Iwould dr motor vehicle £22,995 and credit Hp account (liability to pay in my world) with £22,995.

    When paying, credit bank with full amount, dr Hp in balance sheet with principal and dr HP Interest in P&L with interest element. Treat as a Finance Lease.
  • columbiacolumbia Experienced Mentor Registered Posts: 580
    Thanks for your reply

    Yes, this does seem to make sense, but I thought I would need to credit the HP account with the full amount of the agreement including the interest, which is why I was possibly over confusing things!!

    I will set this up on Sage now, as it obviously has the effect of reducing the liability down to zero in the balance sheet, and posting an expense to the P&L for the interest.

    Thanks again

  • AK002AK002 Font Of All Knowledge Registered Posts: 2,492
    Only recognise the interest against the P&L when it's paid by splitting it out of the monthly payments.

    So DR MV with the MV cost and CR HP with the capital cost only.
Sign In or Register to comment.