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DesertPenguinBooks
October 21, 2024
Question

Vehicle asset vs expense

  • October 21, 2024
  • 1 reply
  • 0 views

I have an accounting/tax question

 

Scenario: A vehicle is purchased for 12k and the purchase is done with a credit card.  The purchase is recorded as debiting a fixed asset account for the vehicle (Original Purchase Price) and crediting the credit card liability account.  We setup recurring transactions to record depreciation expense on the vehicle to depreciation expense account (debit) and crediting the accumulated depreciation account (Sub account of the fixed asset account) of the vehicle.

 

Here's the question: Since we already recorded the full purchase of vehicle on the credit card and it went to original cost of the asset... is there ever a time we would record the payment on the credit card as an expense? Specifically and expense for the vehicle?  My thinking is "no" since we already recorded 100% of the purchase with the credit card and the monthly card payment just pays down the liability account for the card.  Other than deduction vehicle expenses or using the mileage rate.... there would be no recording of expenses for payments on this vehicle, am I correct?

1 reply

Rainflurry
Rainflurry
October 21, 2024

@DesertPenguinBooks 

 

"is there ever a time we would record the payment on the credit card as an expense? Specifically and expense for the vehicle? My thinking is "no" since we already recorded 100% of the purchase with the credit card and the monthly card payment just pays down the liability account for the card. Other than deduction vehicle expenses or using the mileage rate.... there would be no recording of expenses for payments on this vehicle, am I correct?"

 

Yes, you're exactly correct.  CC payments are never an expense, they are a reduction in your cc liability account.  CC charges, when made, can be an expense if you record them as such.  In your case, you correctly recorded the purchase as a fixed asset and will expense the purchase price of the vehicle through depreciation (debit depreciation expense, credit accumulated depreciation).  Costs of owning and operating the vehicle are expensed when incurred either by using the actual expense method or the mileage method.  

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