AccountRight information, hints and tips

[LauraB]

Hi Im having trouble entering my car purchase into MYOB.  

I purchased it from a car yard and have taken out a personal loan on the whole amount, and I'd like to claim the total GST on the car upfront.

I got as far as understanding it needs to be a manual journal entry.  Im confused why I need to enter both a credit and a debit line item?  

Any help would be appreciated!

[Fi]

First you need to make sure you have set up a loan account for your personal loan in your chart of accounts under liabilities.

Every trasnaction you do in MYOB has a debit and credit  - you just can't see it. if you ever want to see this, when entering a transaction and before you record it, go to"edit" and "recap transaction" and you'll see what MYOB is doing behind the scenes!

So if you are entering this transaction manually I'm assuming you are going to do a general journal entry. Go to "Accounts", "Record Journal Entry"

You will debit the asset account with the purchase price. Debit your interest account with the interest and Debit any other admin charges etc to their respective expense accounts. The credit will go to the new loan liability account. Make sure the GST code is only used for the items on the invoice that have it applied to them. ie: Interest has no GST.

Then each month you pay the loan installments you have one transaction- "Accounts" , "Transfer money"  From cheque account to loan account. No GST is on this transaction.You should reconcile this loan account regularly.

Not sure the whole interest is tax deductible in the first year if the term of the loan is longer........ check this with your accountant.

[LeanneBerry]

Hi Laura

Is the car solely used for business purposes - if there is private use I think you should speak with your accountant - you cannot claim 100% of the GST if there is a private portion of use

[Cassandra_Scott]

Laura

I would firstly create two accounts:

1-#### - Motor Vehicle at cost - this is the account which the acquisition of the vehicle will be recorded against

2-#### - Persoanl Loan Acct - this is the account where the loan for the acquisition of the vehicle will be recorded.  When you create this account, set its status to "Credit Card"

Create a Purchase Journal for the acquisiton of the car.  Record the different elements accordingly, and with the appropriate GST Codes.  You should seek advice from your accountant as to what portion of the GST can be claimed for business use.

Using Pay Bills, select the 2-#### account you have created and show this as being used to pay for the MV.

You will also need to create a 2nd PJ record, this time in the name of the financiang entity to pick up any Loan Administration, setup, interest expenses. (coded to the appropriate expense codes)

Use Pay Bills, select the 2-#### account, and use this to pay the PJ.

Your 2-#### account should now show the correct "Loan Liability" value.

When making loan repayments to the finance company/bank, use a Spend Money transaction, and record against the 2-#### account.

At the end of the financial year, your accountant will then look at creating a 1-#### depreciation account (for the MV), and will also create a 2-#### account to record the unexpired interest amount.  These transactions generally form part of the EOFY Journal entries prepared by your accountant in finalising your ITR.

Dont forget that you need to keep a log book for at least a 12 week period in every 3 years (could be 5!) to validate your personal vs business utilisation.

Its not uncommon to claim 100% of vehicle running costs up front, and have a personal use adjustment entered into the books at the end of the financial year. 

[nimo]

Hi Cassandra:

Sorry for distrubing.

I borrowed a chattel mortgage from BMW Finance to purchase a car from a car dealer. Please help to clarify the type - hire purchase or a personal loan. And more complicated, i deposit a portion amount of money from my company's cheque account, and borrow the left from BMW Finance to purchase the car. So could you kindly show me how to enter the car purchase in my circumstance?

Regards,

monica

[Cassandra_Scott]

Hi Monica

The entries that you would make are almost similar to the ones above.  Just amend the details on the Liability account to reflect chattel mortgage.

To account for the funds from the company, just pay this portion of the PJ from the company account, the balance from the 2-#### account.

You may need to speak to your accountant about the implications of LCT (Luxury Car Tax) [I saw you had borrowed from BMW!]

[nimo]

Hi Cassandra:

Thank you for your kind reply! I purchased a subaru from BMW Finance, so dont worry about LCT.

My situation is i borrowed $25968.8 from bmw finance, and  i paid $7000 cash as a down payment, the total price is 32968.8 (inclu GST $2818.53, stamp duty $1216, Registration fee $749). This vehicle is 80% for business usage.  These make the situation more complicated.

I read your previous post, what you mean about creating a purchase journal for the acquistion of the car is entering a purchase (a bill), am i on the right track? Many thanks!!

Regards.

Monica

[Cassandra_Scott]

Monica

You are correct.

Raise a Purchase against the Car Dealer

Pay Bill (From Bank Account) $7000

Pay Bill (From Chattel Mortgage) $32,968.80

Dont forget that you will need to raise a separate Purchase for the Chattel Mortgage costs from BMW Finance.  Some people just add these as a Spend Money transaction, but I prefer to use a PJ.

Confirm with your accountant, but if your business use is 80% then I cant see a problem with 100% being put through the business initially, with a Private Use attribution Journal being raised at EOFY.

[nimo]

Hi Cassandra:

I try to use item layout as i enter the purchase against the car dealer, however, it asked for the Item No, should i just create one for the car? Is that the right way?

As you mentiond previsouly, if my bsuiness use is 80%, i should enter the purchase of 80% * total car price ($32968.8) initially, and then pay bill (from bank account) $7000*80%, pay bill (from chattel mortgate) $25968.8*60%.

Also when i raise a separate purchase from the chattel mortgage costs from BMW Finance, also i need enter the purchse of $25968.80*80%. Am i right?

Last question is when i enter the purchase of the car, should i seprate the stamp duty from the car price?

Sorry about asking so many questions, i am a beginner of Bookkeeping Industry.

Regards,

monica

[Cassandra_Scott]

Monica

I would use a "Service" layout.  You do not need to use items in this instance (items are generally only used for inventory)

Speak with your accountant about whether you need to pick up the 20% private component at this stage.  As already stated, its quite common to put it through at 100%, and have a private use attribution entered by the accountant at the end of the financial year.  This will also relate to the costs from BMW Finance too

You should also separate the Stamp Duty from the new car price.  This element of the purchase does not have GST, and should be coded NT.  You may also find that the rego component of the purchase price does not contain GST.  Often you need to specifically ask the Car Dealership to provide this info clearly, as their documentation can sometimes be ambiguous.

Once you have the transaction entered into MYOB, its wise to get an accountant to have a quick look at it to make sure it is coded quickly for GST purposes.