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Steveleet
April 24, 2022
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Finance and VAT on equipment

  • April 24, 2022
  • 1 reply
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Just purchased a new piece of machinery for the business and have taken out finance over 2 years on the machine.

 

The first finance payment is all the VAT up front plus 10% deposit and a administration charge. After this initial payment it’s a set amount per month for the 48 monthly term.

 

Machinery cost is £3630 plus VAT

1st initial payment out is a 10% deposit £363 plus the full VAT of £726 and administrative charge £50

then amount to borrow on finance is left £3267

after this it’s 24 monthly payments at £142.54 at a flat rate of 2.36%

A final OTP fee of £50


Can anyone advise how to correctly record this first initial payment so I can claim back the whole VAT amount I have to pay on the next VAT return?

then how to record the monthly finance payments correctly in QuickBooks 

Best answer by Giovann_G

Welcome back, Steveleet.

 

I'm here to clarify the steps and point you in the right direction so you'll see the Long-term Liability option.

 

Long-term Liabilities or Long-term borrowings can be found under the Non-current liability account type. You may have selected the Current Liabilities that's why you only see the Short-term option. Please see the revised steps below:

 

  1. Go to the Accounting tab on the left side, then choose Chart of Accounts. 
  2. Click the New button.
  3. In the Account Type drop-down, choose Non-current Liabilities.
  4. Under Detail Type, choose Long-term borrowings.
  5. Enter your desired name in the Name field.
  6. Leave the Unpaid Balance blank, then hit Save.

 

Once done, you can follow the procedure outlined by my colleague above to create a journal entry.

 

I'm also adding this helpful material if you want to learn more about setting up VAT, codes, and rates in QuickBooks Online: Set up and edit VAT settings, codes, and rates.

 

If you'd like to know more about recording finance payments, please add any details below. I'll get back to help you.

1 reply

MichelleBh
MichelleBh
April 24, 2022

I've got you, @Steveleet. I can help you record the monthly finance payments in your QuickBooks account. 

 

I'll make sure that you can record your monthly finance payments accordingly in your account. Below is the step-by-step procedure to track monthly finance payments transactions in QuickBooks Online (QBO). 

 

You can record the original purchase by posting a journal entry. By doing this, you can include any deposits and fees. But before that, let's set up a liability account first for the loan payable.

 

Do the following: 

 

  1. Go to the Accounting tab on the left side, then choose Chart of Accounts. 
  2. Click the New button.
  3. In the Account Type drop-down, pick Long Term Liabilities.
  4. Select Loan Payable in the Detail Type field. 
  5. Type a unique name in the box. 
  6. Leave the Unpaid Balance blank, then click Save and close. 

 

After that, create a Journal Entry to apply the loan to the proper asset accounts. I'll show you how: 

 

  1. Go to the +New and select Journal entry.
  2. Select the liability account you just created from the Account drop-down and enter the loan amount you’re applying to the asset under the Credits column.
  3. Select the appropriate asset account from the box and type the amount in the Debit field. 
  4. Click Save and close. 

 

For more details, see this link: How do I record the loan for an asset? The article is labeled in the U.S., but don't worry, they are the same process in the U.K.

 

Once done, create a check for the repayment and other charges. Do the following: 

 

  1. Go to the + New and select Check. 
  2. In the Category drop-down, choose the liability account you previously created. 
  3. Enter the payment amount in the field.
  4. Pick the expense account for the interest from the Category drop-down and enter the amount.
  5. You can add another line if you want to record any additional fees. 
  6. Click Save and close. 

 

On top of that, I'd suggest consulting an accountant as well. They can review your business needs and guide you what specific category to use. Also, they maybe have other ways to record the loan repayment that meets your business needs. 

 

Furthermore, check out these articles below on how to manage asset depreciation and other related topics: 

 

 

Feel free to drop me a line if you need help with QuickBooks. I'll be here standby, and I'd love to share my years of expertise with you. Keep safe, Steveleet.

S
SteveleetAuthor
April 28, 2022

Thank you fir your response. In my UK QuickBooks I cannot find long term liabilities just short term 

G
Giovann_GAnswer
April 28, 2022

Welcome back, Steveleet.

 

I'm here to clarify the steps and point you in the right direction so you'll see the Long-term Liability option.

 

Long-term Liabilities or Long-term borrowings can be found under the Non-current liability account type. You may have selected the Current Liabilities that's why you only see the Short-term option. Please see the revised steps below:

 

  1. Go to the Accounting tab on the left side, then choose Chart of Accounts. 
  2. Click the New button.
  3. In the Account Type drop-down, choose Non-current Liabilities.
  4. Under Detail Type, choose Long-term borrowings.
  5. Enter your desired name in the Name field.
  6. Leave the Unpaid Balance blank, then hit Save.

 

Once done, you can follow the procedure outlined by my colleague above to create a journal entry.

 

I'm also adding this helpful material if you want to learn more about setting up VAT, codes, and rates in QuickBooks Online: Set up and edit VAT settings, codes, and rates.

 

If you'd like to know more about recording finance payments, please add any details below. I'll get back to help you.

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