We sold a vehicle to one of our drivers. He wrote a check for downpayment and for the rest of the amount he will do monthly payment.
For this vehicle we still have loan payments (loan payable).
How should I record this transacations?
Thank you very much!
Legally since he can not register the vehicle until you pay off the lien on it, you are not selling it, you are accumulating the agreed upon purchase price against the day he can buy it, lien free.
His payments would be deposited and posted to deferred income liability account you create
When his payments = the agreed upon selling price, you ...
1. pay off the loan and obtain a lien released title
2. Transfer the title to his ownership
3. calculate and post partial year depreciation
4. create an income account called gain/loss on asset sale
5. move deferred revenue to the gain loss account, debit deferred revenue, credit gain loss
6. move fixed asset vehicle cost to the gain loss account, debit gain loss, credit fixed asset
7. move accumulated depreciation vehicle to the gain loss account, debit accumulated depreciation, credit gain loss
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