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JamesWoodcock
July 17, 2021
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uk hire purchase

  • July 17, 2021
  • 1 reply
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I have purchased a piece of medical equipment on hire purchase. I am a UK limited company and VAT registered (MTD) . The cost of the equipment is £43,000 + VAT. I have paid  a 10% deposit (£4,300) and paid the VAT (£8,600) upfront , so have a banking transaction for £12,900 ready to be allocated within Quickbooks. I will then pay 48 monthly payments of £928.05 which include the repayment/interest element.

Please advise how I set this agreement up in quickbooks (detailed steps would be appreciated as I am fairly new to QB) to correctly allocate the initial payment that I have made of £12,900 and then how I allocate the 48 payments to follow. I will share you advice with my accountant .Many thanks

Best answer by Rea_M

I'll make sure you're able to record a hire purchase in QuickBooks Online (QBO) accordingly, @JamesWoodcock.

 

You'll have to start by creating some appropriate accounts. You can do this by going to the Accounting menu. Choose Chart of Accounts, and click the green New button in the top right-hand corner of the screen.

 

 

Since the Hire Purchase agreement is more than 12 months, add a Non-current Liability account with Note Payable as the detail type, and make sure to leave the Unpaid balance box empty. Then, add a Tangible Asset account with Machinery and equipment as the detail type, and make sure to leave the Original cost box empty. Please see the screenshot below for your reference.

 

 

Once you have your accounts, create a Journal from the + New button. This is to recorded the assets value and the amount owed on the Hire Purchase. Here's how:

  1. Go to the + New button.
  2. Select Journal entry.
  3. On the first line, in the account column select the Tangible Asset account you've created, and add the Assets value to the  Debits Column.
  4. On the second line, in the account column add your Liability account, the Credits column.
  5. Enter information in the memo section so you know why you made the journal entry.
  6. Select Save and new or Save and close.

 

After that, you can record your initial payments that includes all the VAT of the full purchase, plus any processing fees, and the expected interest; all of which are on top of the Assets value. To do that, you can refer to this this article's Record your initial payments section for the step-by-step guide: How to record a Hire Purchase agreement in QuickBooks Online.

 

Additionally, any future payments to your hire purchase can be recorded as an Expense with Hire Purchase Liability selected as category with No VAT  recorded against it.

 

Also, you can read the topics from this article to further guide you in managing your expenses in QBO  Expenses and suppliers QBO.

 

Feel free to post a reply below if you have other further concerns. I'm always here to help. Have a great day ahead, and take care always.

1 reply

R
Rea_MAnswer
July 17, 2021

I'll make sure you're able to record a hire purchase in QuickBooks Online (QBO) accordingly, @JamesWoodcock.

 

You'll have to start by creating some appropriate accounts. You can do this by going to the Accounting menu. Choose Chart of Accounts, and click the green New button in the top right-hand corner of the screen.

 

 

Since the Hire Purchase agreement is more than 12 months, add a Non-current Liability account with Note Payable as the detail type, and make sure to leave the Unpaid balance box empty. Then, add a Tangible Asset account with Machinery and equipment as the detail type, and make sure to leave the Original cost box empty. Please see the screenshot below for your reference.

 

 

Once you have your accounts, create a Journal from the + New button. This is to recorded the assets value and the amount owed on the Hire Purchase. Here's how:

  1. Go to the + New button.
  2. Select Journal entry.
  3. On the first line, in the account column select the Tangible Asset account you've created, and add the Assets value to the  Debits Column.
  4. On the second line, in the account column add your Liability account, the Credits column.
  5. Enter information in the memo section so you know why you made the journal entry.
  6. Select Save and new or Save and close.

 

After that, you can record your initial payments that includes all the VAT of the full purchase, plus any processing fees, and the expected interest; all of which are on top of the Assets value. To do that, you can refer to this this article's Record your initial payments section for the step-by-step guide: How to record a Hire Purchase agreement in QuickBooks Online.

 

Additionally, any future payments to your hire purchase can be recorded as an Expense with Hire Purchase Liability selected as category with No VAT  recorded against it.

 

Also, you can read the topics from this article to further guide you in managing your expenses in QBO  Expenses and suppliers QBO.

 

Feel free to post a reply below if you have other further concerns. I'm always here to help. Have a great day ahead, and take care always.

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