Accounting for Vehicles
System
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I was hoping somone could help me with a query I have.
It's been so long since I did the foundation and intermeditate level I seem to have forgotten the basics! :?
My company has just purchased a new vehicle on Hire Purchase. Now, I'm sure I remember something about not classing hire purchase vehicles as fixed assets until we stop paying monthly and actually purchase the vehicle. If this is the case I can't remember how to account for it in the accounts. Does the full amount go in as an expense and then the amount is reduced every month when we pay?
It's been so long since I did the foundation and intermeditate level I seem to have forgotten the basics! :?
My company has just purchased a new vehicle on Hire Purchase. Now, I'm sure I remember something about not classing hire purchase vehicles as fixed assets until we stop paying monthly and actually purchase the vehicle. If this is the case I can't remember how to account for it in the accounts. Does the full amount go in as an expense and then the amount is reduced every month when we pay?
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Comments
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Re:Accounting for Vehicles
You need to debit Motor Vehicles with the cost of the car and credit HP account (ie a loan on the balance sheet)
When each repayment is made you need to post the capital element to the HP account to reduce the creditor and the interest element to HP interest account in the P&L.0 -
Re:Accounting for Vehicles
Thanks so much! This is kinda what I thought but I forgot about the interest so good job you reminded me.0