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Vuralriza1
January 23, 2020
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How to record a financed expense?

  • January 23, 2020
  • 1 reply
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Hi,

 

I need to record my business insurance expense for that we used to finance option.

Let's say:

Insurance Expense £10,000

I Used finance for the expense and will pay £1100 as instalments for the next 10 months (in total 1000 for interest and the rest for principal)

Could you please explain step by step how to record the payment of the insurance expense and the instalments payments to finance company.

 

Thank you

Riza

 

Best answer by emmam6

Hello Community Users, We just wanted to add some clarification to this thread.

In the case of a financed expense you would need to record the finance first. So is that amount on finance a long/short term loan to the business? In which case you would need to set up a chart of account for the loan under the detail type liability-selecting the most relevant one to match with short or long term loans. You would enter the balance you received. 

 

Then you can use the recurring feature to set up a recurring expense for supplier A, assuming you had the finance directly added to your bank. You can then set up a separate recurring transaction to pay off the loan/finance.

 

We'd really suggest speaking with an accountant to help you as financed expenses can be tricky and they may want you to record this a different way.

1 reply

katherinejoyceO
katherinejoyceO
January 23, 2020

Hi there, @Vuralriza1. 

 

Thanks for visiting the Community. I appreciate you for sharing detailed information on your goal. 

 

Sure, let's create a bill to record the full amount of your payable to that finance company, then use the Pay bills to enter your installments. Here's how: 

 

  1. In the + New menu, select Bill.
  2. Choose your finance company in the Supplier drop-down menu. You can also click the + Add new to add supplier to the list. 
  3. From the Terms drop-down menu, choose your preferred bill's term. The terms show when the supplier expects payment.
  4. Enter the Bill date and specify the Due date for the bill. 
  • The bill date is when it's created, entered, or received.
  • The due date is when you must pay for the finance company.

     5.  Select an expense account under the Category drop-down list, then enter the full amount

          of  £11,000 in the Amount field.

     6. Enter all necessary information under the Category and Item details.

     7. Select Save and close.

 

Once done, you can now enter your partial payment by opening the bill you've created. Here's how: 

 

  1. Click the + New menu, then go to the Suppliers tab.
  2. Locate your supplier, then select Pay Bills in the Action column.
  3. In the Payment account, select the bank account you want the payment to be taken out from.
  4. Enter the payment date.
  5. Under the Outstanding Transactions section, enter the partial payment amount ( £1,100 ) in the Payment field. 
  6. Click Save and close. 

 

You can now keep track of your payable by running Accounts payable aging detail report. Learn about how to customise supplier reports according to your business needs. 

 

For future reference, read through this help article: What is the difference between bills, cheques, and expenses?. It helps you decide when to create bills and cheques or expense to record your payables and expenses. 

 

Feel free to message again if you have additional questions. We're always delighted to help you more. 

V
Vuralriza1Author
January 24, 2020
 
Shouldn't we supposed the enter the insurance companies invoice on the first place, and create a transaction as a loan to cover the insurance expense and the recording the payments as principal and another one expense for the interest paid?
In your case, I will be just able to enter the finance transaction, not the insurance expense itself.
 
Thank you
 
 
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