HOW TO RECORD CAPITAL PURCHASES AND FINANCE IN ACCOUNTRIGHT

There are many finance options available to purchase capital equipment. Commonly used in Australia are:

• chattel mortgages: ownership of the item transfers to the business when the lending company pays the supplier of the goods.
• hire purchase: ownership of the goods remain with the lending company until the agreement is paid out.
• lease agreements: ownership stays with the leasing body and the goods are never owned by the business.
• personal loans: these loans are usually from those close to the entity (e.g. directors, family or benevolent friends) and can be treated in the same manner as a chattel mortgage.

This article will focus on chattel mortgages as it is the most commonly used within the SME community. It will look at:

• purchase of capital equipment with a long depreciation period (e.g. warehouse racking or workshop machinery)
• repayments
• handling purchases of motor vehicles.

PURCHASE OF ITEMS

Prior to recording the purchase transaction in AccountRight, you need to:

1. Assemble all the necessary paperwork – these may include:

• details of the purchase including any relevant serial numbers
• details of any deposits paid
• details of the disbursement from the loan document

You should also determine:

• The total cost of the loan
• The amount of interest payable
• Establishment fees

2. Discuss with your accountant as to how they would like the items recorded in the Balance Sheet. They may be happy with it being recorded under one of the generic accounts, or they may ask that it be set up as a new account on the Balance Sheet.

• Every capital account must have an account immediately below it to show the depreciation accumulated to date. For example:

1-2901               Machinery At Cost                             CAP

1-2905               Machinery Accum. Depreciation       N-T

Or

1-2910               CNC Bridgeport Mill                            CAP

1-2950               CNC Mill Accum. Depreciation           N-T

• The loan must be established on the chart of accounts with an account called ‘Unexpired Interest’ (see below). This is always set up as a Liability Account (Long Term) and is normally done as a Credit Card type account, so that money can be spent from and received into this account.

2-2100               ABC Loan for CNC Mill                     N-T

2-2105               Unexpired Interest on ABC Loan      N-T

• In AccountRight, you do not receive money from the loan company – the loan is always populated by spending money from it.

Entering the transactions in AccountRight

In the example below, the equipment bill is listed as $89,590.20 with an interest of $12,863.05, totalling $102,453.25. The loan is to be paid back over 48 payments – 47 payments of $2137.57 and one payment of $1987.46.

1. Create a card for the finance company. In our example, we’ll call it ‘ABC Loan’ .
2. Create a purchase transaction for the equipment ($89,590.20), bearing in mind the following:

• Enter in detailed information (e.g. description of the item, particularly serial numbers, and information on warranty)
• The account should be the 1-xxxx determined earlier
• If you have multiple locations, it should also define where the item is to be located

3.Pay the bill, selecting the ‘Pay from Account’ as the 2-xxxx loan account set up earlier and entering in the amount of the loan ($89,590.20).

Upon recording this example transaction, both the 1-xxxx account and the 2-xxxx account now have a value of $89,590.20.

4. Create a Spend Money transaction with the 2-xxxx loan account as the Pay from Account, and the Acct No. as the 2-xxxx Unexpired Interest account. In our example, the unexpired interest amount is $12,863.05.

In our example, the accounts now look like this:

That is the last time you’ll need to touch the 1-xxxx accounts until the accountant finalises the accounts and gives you a depreciation figure.

A word of warning – unless you are familiar with the depreciation schedule that the accountant is using you should not attempt to determine the depreciation yourself. The depreciation is normally journaled in as part of the alignment journal and the other side of it is Depreciation on the P & L.

REPAYMENT OF LOAN

Making your first Payment

As the establishment fee is normally added to the first payment, the first payment may be slightly higher than the remaining payments.

1. Create a Spend Money transaction, selecting your bank account as the ‘Pay from Account’
2. The payment should show the repayment amount for the loan, including the establishment fee (if applicable). In our example, this would look like the following:

2-2100               ABC Loan                        $2137.57          N-T

6- xxxx               Bank Charges                $432.95             FRE

Note:

If you have a complete schedule from the finance company, it can be entered as:

2-2100               ABC Loan                $500.00             N-T

2-2105               Unexpired Interest    $1508.08          N-T

6- xxxx               Bank Charges          $432.95            FRE

This method means that you have to make changes every month reflecting the principal/interest. You may be more comfortable leaving this adjustment to the accountant come EOFY, as it does not affect your day-to-day reporting.

Making the second (and the next 46) payments

• These can be made following either of the above examples, minus the bank charges.
• It is better to wait until the money has come out of the bank and either picked up by bank feeds or shown on a statement to create the Spend Money transactions.
• If the finance company imposes fees for late payment, these should be allocated to a Bank Charges account. Penalty Interest should be allocated to an Interest Expense account – normally a 9-xxxx.

Making the final payment

• Confirm with the loan company the amount of the final payment - it should be the net amount on the loan minus the unexpired interest.
• After the final payment is made, any amount on the loan account should equal the Unexpired Interest, but in opposite direction. Payment from the Loan to Unexpired Interest should zero both lines.

HANDLING MOTORISED VEHICLES

All motorised vehicles have a relatively short depreciation period compared to plant and equipment so are separated on the accounts list. There are also different ways of writing down the value of a motor vehicle, so seek the advice of your accountant.

In recording any vehicle purchase, remember to record the Vehicle Identification Number (VIN) as it may be required for audit purposes. Other items that should form part of your record are the make, model, colour and registration number.

Trucks, off-road vehicles, tractors, fork lifts, trailers and vehicles that are not passenger vehicles can be treated in the same manner as the equipment entries we used in the example above.

This is also true of motor vehicles with a purchase price less than the Luxury Car Tax threshold. However, consideration should be given to the balloon, which seems to be an increasingly common means of writing loans for motor vehicles.

The Balloon

The balloon refers to the amount remaining after the number of payments specified in the contract has been paid. This amount needs to be paid back to the finance company to finalise the loan agreement. It is generally less than the written down value of the vehicle at the completion of the loan. Commonly, the balloon is rolled into a new loan figure as the vehicle is changed for a later model. Any loan document must specify the amount of the balloon at the completion of the loan.

Below are the accounts required for a loan with a balloon:

1-xxx0                              M-V at Cost

1-xxx5                              M-V Accum Dep

2- xxx0                             XYZ Loan M-V

2- xxx5                             XYZ Loan Unexp. Int.

2-xx10                              XYZ Loan – Balloon

As with equipment loans, the loan is set up as a Credit Card type account.

Using either Spend Money or Purchase and Pay Bill transactions, the vehicle is paid for from the loan account.

Using Spend Money, the balloon is paid to the 2-xx10 account.

The balance of the figure is then paid, using a Spend Money transaction, from the Loan Account to the Unexpired Interest Account.

Deposits Paid

Most car traders require a deposit to be paid by the owner/director. This becomes the first payment to the motor vehicle cost. On some occasions, this is included in the payment from the loan company and the deposit refunded by the car trader. The deposit should show as coming from and returning to the Director’s Loan account.

Trade In

A trade in is seen as a sale from your business to the car trader and must be acknowledged as such. It is normally recorded as an Other Income type account (8-xxxx Sale of Assets) with funds flowing to and from the Undeposited Funds account or another clearing account.

If you are trading in a vehicle that is above the Luxury Car Tax Threshold (see below), there are rules that need to be followed and are outside the scope of these notes.

Luxury Car Tax Threshold

The government has determined that the vehicles over a certain value cannot be written off as a business expense.

For the 2016 financial year, the Luxury Car Threshold is $63,184, or $75,375 for a fuel efficient vehicle.

There are some exceptions to the application of the threshold. Most notable are utilities, emergency vehicles, vehicles specifically modified for use by disabled drivers/passengers, and vehicles purchased by registered charities. Any LCT 4-door utility should be discussed with your accountant and/or the ATO.

Anything outside the LCT threshold cannot be claimed and the CAP figure should be 1/11th of the LCT limit.

This means that if there is a loan supporting this purchase, the first $63,184 can be paid from the loan towards the vehicle as CAP. The unexpired interest and any balloon considerations should also be paid from the loan account. The remainder of the loan should be paid to the Director’s Loan account and this account used to pay the remainder of the vehicle, coded N-T.

I understand this is a very vast and complex topic. I have opted to concentrate on Chattel Mortgage, being the most common form of financing. And included a brief description of the difference between the various forms of finance.

Should you need any further information on anything covered in this article, or would just like to chat about finance, please comment below. I’d be happy to discuss.

Happy reading!!

Ron Boulton

BAS Group
1300 BAS GRP (1300 227 477)
ron@basgroup.com.au

HOW TO RECORD CAPITAL PURCHASES AND FINANCE IN ACCOUNTRIGHT

There are many finance options available to purchase capital equipment. Commonly used in Australia are:

• chattel mortgages: ownership of the item transfers to the business when the lending company pays the supplier of the goods.
• hire purchase: ownership of the goods remain with the lending company until the agreement is paid out.
• lease agreements: ownership stays with the leasing body and the goods are never owned by the business.
• personal loans: these loans are usually from those close to the entity (e.g. directors, family or benevolent friends) and can be treated in the same manner as a chattel mortgage.

This article will focus on chattel mortgages as it is the most commonly used within the SME community. It will look at:

• purchase of capital equipment with a long depreciation period (e.g. warehouse racking or workshop machinery)
• repayments
• handling purchases of motor vehicles.

PURCHASE OF ITEMS

Prior to recording the purchase transaction in AccountRight, you need to:

1. Assemble all the necessary paperwork – these may include:

• details of the purchase including any relevant serial numbers
• details of any deposits paid
• details of the disbursement from the loan document

You should also determine:

• The total cost of the loan
• The amount of interest payable
• Establishment fees

2. Discuss with your accountant as to how they would like the items recorded in the Balance Sheet. They may be happy with it being recorded under one of the generic accounts, or they may ask that it be set up as a new account on the Balance Sheet.

• Every capital account must have an account immediately below it to show the depreciation accumulated to date. For example:

1-2901               Machinery At Cost                             CAP

1-2905               Machinery Accum. Depreciation       N-T

Or

1-2910               CNC Bridgeport Mill                            CAP

1-2950               CNC Mill Accum. Depreciation           N-T

• The loan must be established on the chart of accounts with an account called ‘Unexpired Interest’ (see below). This is always set up as a Liability Account (Long Term) and is normally done as a Credit Card type account, so that money can be spent from and received into this account.

2-2100               ABC Loan for CNC Mill                     N-T

2-2105               Unexpired Interest on ABC Loan      N-T

• In AccountRight, you do not receive money from the loan company – the loan is always populated by spending money from it.

Entering the transactions in AccountRight

In the example below, the equipment bill is listed as $89,590.20 with an interest of $12,863.05, totalling $102,453.25. The loan is to be paid back over 48 payments – 47 payments of $2137.57 and one payment of $1987.46.

1. Create a card for the finance company. In our example, we’ll call it ‘ABC Loan’ .
2. Create a purchase transaction for the equipment ($89,590.20), bearing in mind the following:

• Enter in detailed information (e.g. description of the item, particularly serial numbers, and information on warranty)
• The account should be the 1-xxxx determined earlier
• If you have multiple locations, it should also define where the item is to be located

3.Pay the bill, selecting the ‘Pay from Account’ as the 2-xxxx loan account set up earlier and entering in the amount of the loan ($89,590.20).

Upon recording this example transaction, both the 1-xxxx account and the 2-xxxx account now have a value of $89,590.20.

4. Create a Spend Money transaction with the 2-xxxx loan account as the Pay from Account, and the Acct No. as the 2-xxxx Unexpired Interest account. In our example, the unexpired interest amount is $12,863.05.

In our example, the accounts now look like this:

That is the last time you’ll need to touch the 1-xxxx accounts until the accountant finalises the accounts and gives you a depreciation figure.

A word of warning – unless you are familiar with the depreciation schedule that the accountant is using you should not attempt to determine the depreciation yourself. The depreciation is normally journaled in as part of the alignment journal and the other side of it is Depreciation on the P & L.

REPAYMENT OF LOAN

Making your first Payment

As the establishment fee is normally added to the first payment, the first payment may be slightly higher than the remaining payments.

1. Create a Spend Money transaction, selecting your bank account as the ‘Pay from Account’
2. The payment should show the repayment amount for the loan, including the establishment fee (if applicable). In our example, this would look like the following:

2-2100               ABC Loan                        $2137.57          N-T

6- xxxx               Bank Charges                $432.95             FRE

Note:

If you have a complete schedule from the finance company, it can be entered as:

2-2100               ABC Loan                $500.00             N-T

2-2105               Unexpired Interest    $1508.08          N-T

6- xxxx               Bank Charges          $432.95            FRE

This method means that you have to make changes every month reflecting the principal/interest. You may be more comfortable leaving this adjustment to the accountant come EOFY, as it does not affect your day-to-day reporting.

Making the second (and the next 46) payments

• These can be made following either of the above examples, minus the bank charges.
• It is better to wait until the money has come out of the bank and either picked up by bank feeds or shown on a statement to create the Spend Money transactions.
• If the finance company imposes fees for late payment, these should be allocated to a Bank Charges account. Penalty Interest should be allocated to an Interest Expense account – normally a 9-xxxx.

Making the final payment

• Confirm with the loan company the amount of the final payment - it should be the net amount on the loan minus the unexpired interest.
• After the final payment is made, any amount on the loan account should equal the Unexpired Interest, but in opposite direction. Payment from the Loan to Unexpired Interest should zero both lines.

HANDLING MOTORISED VEHICLES

All motorised vehicles have a relatively short depreciation period compared to plant and equipment so are separated on the accounts list. There are also different ways of writing down the value of a motor vehicle, so seek the advice of your accountant.

In recording any vehicle purchase, remember to record the Vehicle Identification Number (VIN) as it may be required for audit purposes. Other items that should form part of your record are the make, model, colour and registration number.

Trucks, off-road vehicles, tractors, fork lifts, trailers and vehicles that are not passenger vehicles can be treated in the same manner as the equipment entries we used in the example above.

This is also true of motor vehicles with a purchase price less than the Luxury Car Tax threshold. However, consideration should be given to the balloon, which seems to be an increasingly common means of writing loans for motor vehicles.

The Balloon

The balloon refers to the amount remaining after the number of payments specified in the contract has been paid. This amount needs to be paid back to the finance company to finalise the loan agreement. It is generally less than the written down value of the vehicle at the completion of the loan. Commonly, the balloon is rolled into a new loan figure as the vehicle is changed for a later model. Any loan document must specify the amount of the balloon at the completion of the loan.

Below are the accounts required for a loan with a balloon:

1-xxx0                              M-V at Cost

1-xxx5                              M-V Accum Dep

2- xxx0                             XYZ Loan M-V

2- xxx5                             XYZ Loan Unexp. Int.

2-xx10                              XYZ Loan – Balloon

As with equipment loans, the loan is set up as a Credit Card type account.

Using either Spend Money or Purchase and Pay Bill transactions, the vehicle is paid for from the loan account.

Using Spend Money, the balloon is paid to the 2-xx10 account.

The balance of the figure is then paid, using a Spend Money transaction, from the Loan Account to the Unexpired Interest Account.

Deposits Paid

Most car traders require a deposit to be paid by the owner/director. This becomes the first payment to the motor vehicle cost. On some occasions, this is included in the payment from the loan company and the deposit refunded by the car trader. The deposit should show as coming from and returning to the Director’s Loan account.

Trade In

A trade in is seen as a sale from your business to the car trader and must be acknowledged as such. It is normally recorded as an Other Income type account (8-xxxx Sale of Assets) with funds flowing to and from the Undeposited Funds account or another clearing account.

If you are trading in a vehicle that is above the Luxury Car Tax Threshold (see below), there are rules that need to be followed and are outside the scope of these notes.

Luxury Car Tax Threshold

The government has determined that the vehicles over a certain value cannot be written off as a business expense.

For the 2016 financial year, the Luxury Car Threshold is $63,184, or $75,375 for a fuel efficient vehicle.

There are some exceptions to the application of the threshold. Most notable are utilities, emergency vehicles, vehicles specifically modified for use by disabled drivers/passengers, and vehicles purchased by registered charities. Any LCT 4-door utility should be discussed with your accountant and/or the ATO.

Anything outside the LCT threshold cannot be claimed and the CAP figure should be 1/11th of the LCT limit.

This means that if there is a loan supporting this purchase, the first $63,184 can be paid from the loan towards the vehicle as CAP. The unexpired interest and any balloon considerations should also be paid from the loan account. The remainder of the loan should be paid to the Director’s Loan account and this account used to pay the remainder of the vehicle, coded N-T.

I understand this is a very vast and complex topic. I have opted to concentrate on Chattel Mortgage, being the most common form of financing. And included a brief description of the difference between the various forms of finance.

Should you need any further information on anything covered in this article, or would just like to chat about finance, please comment below. I’d be happy to discuss.

Happy reading!!

Ron Boulton

BAS Group
1300 BAS GRP (1300 227 477)
ron@basgroup.com.au

Ron,

Very detailed article.

A few observations -

  The Card for the Finance Coy should include the monthly amount.

  I would set up 2 Cards  ABC Loan 47 by $2137.57

                                        ABC Loan final Oct 19 $1987.46

The Luxury Car Threshold (ie when Luxury Car Tax is charged) and the Luxury Car Limit for depreciation and Input Tax Credits are 2 different figures.

My understanding is that the Luxury Car Limit for depreciation and Input Tax Credits for FY16 is $57,466.

The maximum amount of Input Tax Credits that can be claimed is $57,466 / 11 = $5224.

If there is personal use, I reduce the $5224 by the personal use %.

If a car costs more than $57,466, I create a separate ledger called MV (over $57466).

This is important in working out a potential profit on sale given that depreciation at 15/30% means a car is often written down faster than its resale price.

Accounting for cars is indeed complex - as you say all business owners should consult their accountant for advice. Cloud Accounting should assist in getting regular advice from an accountant.

Duncan Smith

Business Advice + Tax

Ron,

Very detailed article.

A few observations -

  The Card for the Finance Coy should include the monthly amount.

  I would set up 2 Cards  ABC Loan 47 by $2137.57

                                        ABC Loan final Oct 19 $1987.46

The Luxury Car Threshold (ie when Luxury Car Tax is charged) and the Luxury Car Limit for depreciation and Input Tax Credits are 2 different figures.

My understanding is that the Luxury Car Limit for depreciation and Input Tax Credits for FY16 is $57,466.

The maximum amount of Input Tax Credits that can be claimed is $57,466 / 11 = $5224.

If there is personal use, I reduce the $5224 by the personal use %.

If a car costs more than $57,466, I create a separate ledger called MV (over $57466).

This is important in working out a potential profit on sale given that depreciation at 15/30% means a car is often written down faster than its resale price.

Accounting for cars is indeed complex - as you say all business owners should consult their accountant for advice. Cloud Accounting should assist in getting regular advice from an accountant.

Duncan Smith

Business Advice + Tax

Thanks ronatbas great information and examples will also be referring to this blog to my clients as well.

Thanks ronatbas great information and examples will also be referring to this blog to my clients as well.

DuncanS

Hi Duncan

I don't know how many times I thought I must remember to put the amount after the Loan name and then sent it off without doing so. I really like your system of also adding the number of payments and your further input re LCT - Suja had given me a 'deadline' and I was already pushing the boundary on that so I didn't complete the LCT. I also like your treatment of  LCT vehicles on the COA.

Regards

Ron



Hi Duncan

I don't know how many times I thought I must remember to put the amount after the Loan name and then sent it off without doing so. I really like your system of also adding the number of payments and your further input re LCT - Suja had given me a 'deadline' and I was already pushing the boundary on that so I didn't complete the LCT. I also like your treatment of  LCT vehicles on the COA.

Regards

Ron

Sally_k

I don't think any accountant expects the bookkeeper to adjust depreciation. They should have their schedules using one or other of the accepted depreciation methods and it is not up to you to second guess their preferred method. What I would be doing is scan all of the Capital equipment invoices and sending them to the accountant so that when they eventually get the file they can determine the depreciation they are able to claim. They should also advise you on the timing of the entry dates for the machines mentioned in your second note. It is all going to depend on when they last reported.

Going back to the purchase query - you will the 1-2910               CNC Bridgeport Mill                            CAP.

On your chart there may not be specific Item and all of the mills may be gathered up under 1 xxxx Machinery at Cost.

MYOB will puts a message about using this account ... press OK



I don't think any accountant expects the bookkeeper to adjust depreciation. They should have their schedules using one or other of the accepted depreciation methods and it is not up to you to second guess their preferred method. What I would be doing is scan all of the Capital equipment invoices and sending them to the accountant so that when they eventually get the file they can determine the depreciation they are able to claim. They should also advise you on the timing of the entry dates for the machines mentioned in your second note. It is all going to depend on when they last reported.

Going back to the purchase query - you will the 1-2910               CNC Bridgeport Mill                            CAP.

On your chart there may not be specific Item and all of the mills may be gathered up under 1 xxxx Machinery at Cost.

MYOB will puts a message about using this account ... press OK

forms

There are a couple of issues here that make me think that you really need to talk to the client's accountant.

A chattel mortgage implies that the vehicle was bought by the client. Was the agreement a separate document? 

It will depend on the book value of the vehicle at the time of sale. The accountant will need cost of vehicle, amount of loan, amount repaid to date and date of sale.

They will then work out the depreciated value of the vehicle and if there has been a profit or loss on the sale of the vehicle.

To save me writing a lot of details of processes about if this, if that, once you have the information please come back through the main part of the forum if you need further assistance.

There are a couple of issues here that make me think that you really need to talk to the client's accountant.

A chattel mortgage implies that the vehicle was bought by the client. Was the agreement a separate document? 

It will depend on the book value of the vehicle at the time of sale. The accountant will need cost of vehicle, amount of loan, amount repaid to date and date of sale.

They will then work out the depreciated value of the vehicle and if there has been a profit or loss on the sale of the vehicle.

To save me writing a lot of details of processes about if this, if that, once you have the information please come back through the main part of the forum if you need further assistance.

Hi Duncan

Great article thankyou

Many thanks

Geoff

Busselton Bookkeeping Service

Hi Duncan

Great article thankyou

Many thanks

Geoff

Busselton Bookkeeping Service

Timtam

Sorry I missed this as it was not on the main boards.

A $2000 vehicle that is obviously more than 12 years old would be well and truly depreciated to zero so the first entry you should make is to your Depreciation on M/V which should sit immediately below 1-2211. Dr Depreciation (6-xxxx) Cr Dep on MV (1-xxxx). This could all be recorded as 30/6/11.

If your client is registered for GST then the sale would include GST and the account should be (8 -xxxx) Other Income.



Sorry I missed this as it was not on the main boards.

A $2000 vehicle that is obviously more than 12 years old would be well and truly depreciated to zero so the first entry you should make is to your Depreciation on M/V which should sit immediately below 1-2211. Dr Depreciation (6-xxxx) Cr Dep on MV (1-xxxx). This could all be recorded as 30/6/11.

If your client is registered for GST then the sale would include GST and the account should be (8 -xxxx) Other Income.

Hi @ronatabs

your article is amazing and save my life :-) I am doing hire purchase for construction company My boss bought CNC machine  on hire purchase and your example help me very well . I want to know when you enter the purchase and use the tax code  N-T but in above lines it was CAP

1-2910               CNC Bridgeport Mill                            CAP

1-2950               CNC Mill Accum. Depreciation           N-T

kindly explain me which code should I use for Purchase ?

Another question is I  just create the depreciation account as you suggest but I don't know how their accountant do the deprecation . Is it alright if I didn't touch the depreciation and at the end accountant handle as he want to do it. Because I am doing their backlog and as well as working for current financial year but I have not any idea about depreciation.

Also if you can explain me how 2-2105  Unexpired Interest on ABC Loan    account will reconcile at the end?

Warm Regards

Sally 

Hi @ronatabs

your article is amazing and save my life :-) I am doing hire purchase for construction company My boss bought CNC machine  on hire purchase and your example help me very well . I want to know when you enter the purchase and use the tax code  N-T but in above lines it was CAP

1-2910               CNC Bridgeport Mill                            CAP

1-2950               CNC Mill Accum. Depreciation           N-T

kindly explain me which code should I use for Purchase ?

Another question is I  just create the depreciation account as you suggest but I don't know how their accountant do the deprecation . Is it alright if I didn't touch the depreciation and at the end accountant handle as he want to do it. Because I am doing their backlog and as well as working for current financial year but I have not any idea about depreciation.

Also if you can explain me how 2-2105  Unexpired Interest on ABC Loan    account will reconcile at the end?

Warm Regards

Sally 

Telperien

You should move the money from the loan account to the balloon account as at the date of the loan so that loan account is representative of the amount still payable on the loan.It will not be exactly the amount payable as your accountant should do the adjustment to the interest when he finalises the accounts at year end.

The deposit paid, then refunded should be paid back to account that it came from. Either your trading account/Credit card or personal funds. Personal funds are generally represented on the chart of accounts as Directors Loan or Directors current account.

Ron



You should move the money from the loan account to the balloon account as at the date of the loan so that loan account is representative of the amount still payable on the loan.It will not be exactly the amount payable as your accountant should do the adjustment to the interest when he finalises the accounts at year end.

The deposit paid, then refunded should be paid back to account that it came from. Either your trading account/Credit card or personal funds. Personal funds are generally represented on the chart of accounts as Directors Loan or Directors current account.

Ron

Thanks for your very detailed article ronatbas!

Capital purchases are often asked about, chattel mortgages in particular. This will be a fantastic reference material for anyone wanting to know how to record these purchases and deal with the financing. I'll certainly be directing people to this information in future.

Thanks for your very detailed article !

Capital purchases are often asked about, chattel mortgages in particular. This will be a fantastic reference material for anyone wanting to know how to record these purchases and deal with the financing. I'll certainly be directing people to this information in future.