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Dec 4, 2019 9:38 PM UTC
Solved

Asset purchased via Hire Purchase

How do I account for the purchase of Fixed Asset via Hire Purchase loan. e.g Cost of asset €24,500, Finance charge €1,804. Term 48 months. Repaying €548 per month.
EmmaMAnswer
Dec 5, 2019 3:33 PM UTC

Hello Emily72

 

We would recommend in the case of hire purchase to consult with an accountant on how best to record this.We welcome any posts in the Community from other users who have accounted for the same thing,but still check your accountant is happy with how it is recorded

 

Emma

2 replies

paul72
Dec 5, 2019 2:52 PM UTC

Hi Emily72.

You really should be asking your accountant - this isn't the place to get advice that, if wrong, could leave you in a hole with the powers-that-be.

 

That being said, if it were me, I would make sure I had the invoice entered as fixed asset then you could go one of two ways depending on how the Finance Charge is to be considered.

(1)  if the Finance Charge is an upfront charge, you can enter it on the invoice (No VAT, I guess) as Interest or similar.  You can then just pay off €548 each month via Pay Bills.

(2) if the Finance Charge is ongoing interest - to be considered month-by-month - you can enter it as a separate (notional) bill each month & pay both together via Pay Bills.

or, (3) you can enter each payment as a Cheque with €24,500/48 = €510.42 going to Accounts Payable (Creditors) & €1804/48 = €37.58 to Interest.

(obviously, you will have to round up/down every few months to account for the rounding error)

When you go to Pay Bills, the €510 part of these Cheques will show up as Credits which you can mark off against the original €24,500 invoice.

EmmaMAnswer
Dec 5, 2019 3:33 PM UTC

Hello Emily72

 

We would recommend in the case of hire purchase to consult with an accountant on how best to record this.We welcome any posts in the Community from other users who have accounted for the same thing,but still check your accountant is happy with how it is recorded

 

Emma