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jenvue
October 21, 2022
Question

Creating Check for Payment and Down Payment

  • October 21, 2022
  • 1 reply
  • 0 views

I know how to create a check, but didn't learn how to do such as the below problem. I am a little confused with the wording below. Am I creating a check just for the $2000 or for the $2000 AND the down payments? And if the check is just for the $2000, what do I do with the down payments?

 

Add the purchase of land and a warehouse building from Prime Properties, check no. 1014, amount: $2,000, as a down payment on land $5,000 and a building $15,000. The balance was paid by signing a long-term note for $18,000 (create a new account called Notes Payable – Chase, Account type: Long-Term Liabilities, detail type: Notes Payable).

1 reply

Rainflurry
Rainflurry
October 22, 2022

@jenvue 

 

It sounds to me like the purchase price was $20K ($15K building + $5K land), the down payment was $2K, leaving $18K to be recorded as a loan payable liability. 

 

To record it, set up two different fixed asset accounts: one called 'Land' and another called 'Building'.  It's a good idea to add the address to the account names if you need to differentiate them from any other property owned by the business.  Then, create a long-term liability account as described in your original post.  Then, create check 1014.  Under category details, enter the 'Land' with an amount of $5K, enter the building with an amount of $15K, and enter the note payable liability with an amount of negative $18K.   That will leave $2K on the check as the down payment and you will have both fixed assets (land, building) and the note payable booked correctly.

 

You could also record this with a journal entry.  But, since check 1014 appears to have been already written, I think the above method is cleaner.  Just my $.02

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