Journal to Show Purchase of new vehicle with both HP & Part exchange

RebeccaSmith

Hi,

I was looking at the below guide for a Journal for the purchase of a new vehicle including HP and part exchange. I completely follow and understand the guide until I come to the line where they are posting the part exchange value. It is posted with its gross amount using a T9 code. (No VAT). So how is the VAT on the sale/part exchange of this vehicle accounted for? Is the guide incorrect? Should it show the Net Amount posted to the Sale of Asset code and the VAT posted to the Vat on Sales code? Can anyone advise?


Guide from Sage:

Post the hire purchase figures, including part exchange

Example
A company buys a new car for £8,458.83 including VAT
This figure also includes documentation fees of £50.00, an option fee of £25.00 and Road Tax of £150.00
A deposit of £500.00 was paid, along with a part exchange worth £1,300.00 for an old vehicle
The interest is £2,400 to be paid over 4 years
The vehicle being part exchanged originally cost £4000, but has been depreciated by £3,000
Post the following journal

NOTE
The interest isn't recorded at this point. It's accounted for when you make the monthly repayments.

N/C Name Dept Details T/C Debit Credit
0050 Motor Vehicles Dep Disposal of old Asset T9
0.00
4000.00
4200 Sales of Assets Department Disposal of old Asset T9
4000.00
0.00
This part of the journal moves the value of the asset being part exchanged from the fixed asset nominal code to the Sales of Assets nominal code.
0051 Asset Depreciation Department Value of Depreciation T9
3000.00
0.00
4200 Sales of Assets Department Value of Depreciation T9
0.00
3000.00
This part of the journal moves the value of the depreciation to date from the depreciation nominal code to the Sales of Assets nominal code.
0050 Motor Vehicles Department Net value of new asset T1
6861.53
0.00
0050 Motor Vehicles Department VAT on new vehicle T1
1372.31
0.00
If the VAT can be reclaimed, the 'VAT on new vehicle' should be posted as a debit to the Purchase Tax Control Account nominal code, default 2201, rather than the asset nominal code.
7302 Licences Department Road tax fee for new vehicle T9
150.00
0.00
7304 Misc Motor Expenses Department Document and option fee T9
75.00
0.00
This part of the journal records the road tax and administration fees.
1200 Bank Account Department Deposit paid from bank T9
0.00
500.00
4200 Sales of Assets Department Part exchange value T9
0.00
1300.00
2310 Hire Purchase Department Balance outstanding on the HP agreement T9
0.00
6658.84
This part of the journal records the deposit, the part exchange and the outstanding liability on the HP account. If there's no hire purchase or loan involved, remove the entry for the Hire Purchase, 2310, and add the value to the Bank Account, 1200, making it £7,158.84.