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Business Finance 101 – Motor Vehicle Asset changes

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Business Finance 101 – Motor Vehicle Asset changes

Business Finance 101 – Motor Vehicle Asset changes

Client emailedOur Company bought 2 cars  –

  • Holden Cruze for $16,700.00 includes GST/stamp duty/transfer fee
  • Barina for $12,888.00

We traded in the company car – Holden Commodore for $3000 and the wife’s car for $1500. Daniel has not claimed the $1500 but gave it to the business.

Now both ’new’ cars belong to the company.

Invoice for Holden Cruze is $16,700.00

The $4,500 trade in was netted out of the purchase of the Barina so the invoice is ($12,888- $4,500) $8,388.00 net.

We have in our accounts:-

MV @ cost                             18539.37

MV Accum Depn                  15412.00

Please advise. Thank you.

How to Enter To keep things simple, we need to set up some new accounts (NA) for each motor vehicle, and new accounts for the loans on each car – it is then easiest to leave the final reconciliation and adjustments to your accountant year end.

I assume the 2 MV accounts are only for the Commodore and no other cars. It is good practice to create new accounts for EACH vehicle so the accountant can reconcile at year end with ease!

Separate the Rego (and Insur if included in the deal) from the $16,700 (or you can leave for accountant year end to pick up)

NA          Asset      MV Accum Dep Cruze        (to be used at year end) – create in the Accounts List

Start a new General Journal with Purchase ticked at the top, and tick Includes GST.

Then enter as follows – (create new accounts as you go)

NA          Asset      MVehicle @ Cost Cruze          Dr 16,700 less rego, insur      CAP (tax code)

NA          Liability  Mveh Loan Fin Co Name*       Cr 16,700 less                               N-t

Expen    Rego                                                            Dr $rego                                      split for GST, 2 lines

Expen    Insur (if included)                                   Dr $insur                                    split for GST, 2 lines

Liab        Mveh Loan Fin Co Name                             Dr 4,5000                                        N-t

Liab        Daniel Loan Account                             Cr 1,500                                             N-t

Asset      MVehicle @ Cost Commodore             Cr 3,000                                             N-t

*Is the Loan a Chattel Mortgage? – Can mention type of loan in account name as well

Monthly payments – for simplicity, allocate from bank to NA Liability Mveh Loan Fin Co Name (the new finance account).

The old car accounts – Asset MVehicle @ Cost Commodore, and the MV Accum Dep can be left for the accountant to calculate and adjust at year end, incase there are other adjustments he needs to do.

For other examples of entering MV assets in the accounts, see –

Quickbooks – How to go about setting Chattel Mortgage up and accounting for the monthly payments in Quickbooks.

Another Asset Example – How to enter assets in the books

How do I show liabilities for the total borrowed including interest, not just the principle/asset amount?

Get a FREE 30 min answer to your query, and FREE ongoing email or phone support – no-one offers as much! Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right! Email info@accountkeepingplus.com.au or call 0407 361 596 Australia

 

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Author: accountkeepingplus

Administration, bookkeeping and compliance for small business, Training, trouble-shooting, or we can do the books and payroll for you! Self Managed Superannuation Fund Service Provider, free support MYOB Certified Consultant, Reckon/QuickBooks Professional Partner.

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