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Monday, January 18, 2010

My Business Bought a vehicle and we have a loan. How do I record this in Quickbooks?

To record the entry for the purchase of a vehicle you will need two things, your vehicle purchase contract and your loan documents.

Your vehicle purchase statement will reflect the true "cost" of the vehicle including taxes and document fees as well as additional equipment you added to the vehicle.  In addition, if you received any rebate on the vehicle and this was applied to reduce the price of the vehicle this, in effect, reduces your cost.  The total cost, to put the vehicle into service is the cost prior to any cash "down-payment" you make from your personal funds.  If your "down-payment" is the rebate this must be applied to reduce the total cost.

For our example lets assume the vehicle cost $35,000 and the dealer offered a 5,000 rebate.  This puts the "price" of the vehicle at $30,000.  Assuming tax and doc fees of $2750 and no additional equipment, the total cost to put this vehicle into service is $32,750.  You write a company check for a 10% down payment of $3,275 and take out a loan for the balance of 29,475.  Here is how the entry should be recorded in Quickbooks using the Write Checks feature under the Banking tab on the top menu bar.

Enter the check for amount written.  In the Expense portion of the check debit into your Vehicles Fixed Asset account the total true cost to put the vehicle into service.   Create a new Loan account for this loan.  Do not combine loan accounts in Quickbooks.  Your reconciliation will be difficult and this is basically not the proper way to track your loans.   Create a minus entry for the total amount of the loan.  The difference between the two must be the amount of your down payment.  If it is not, then the cost of the vehicle or the balance of the loan entered are incorrect.

When you make a payment on this loan, your expense entry will go against the new loan account.  Reconcile this loan account each month.  If the lender does not provide a statement, we recommend that you request the balance of the loan with the amount of interest applied from the payment in some form that can be printed, such as an email.  You will record the difference between the interest and principle portion of each payment when you reconcile the account against the statement, or lender provided balance.

This material is for informational purposes only and not intended and financial, legal or tax advice. Please consult your finance, legal or tax professional to confirm the accuracy of all information. Quickbooks is a registered product of Intuit.

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