There may be times when you purchase items that are for the long-term use of the business. You're likely not going to convert these quickly into cash and are known as Fixed assets. Some common examples of fixed assets are: - Vehicles (such as company cars or commercial vehicles)
- Office Furniture, fixtures, and equipment
- Machinery
- Buildings
- Land
Purchase an assetRecord the purchase of an asset as normal as an: - Other Payment - if you're just recording the amount spent with no purchase invoice
- Purchase Invoice - if you want to record the invoice received from a supplier
Which ledger account do I use?- Select a Fixed Asset ledger account
This is because you need to show the values of the asset on your balance sheet. This is unlike normal purchases which show on your profit and loss. We have set up the following Fixed Asset ledger accounts for you. If you have other types of fixed assets, you may need to create your own similar Ledger accounts. Create new ledger accounts | Ledger Account code | Ledger Account name | 0001 | Assets – Cost | | 0010 | Property -Cost | | 0020 | Plant and Machinery - Cost | 0030 | Office equipment and IT – Cost | 0040 | Fixture and fittings – Cost | 0050 | Motor Vehicles – Cost |
Asset bought using a loan or hire purchase If you buy and finance a fixed asset with a loan or hire purchase, you’ll need to include charges at the same time as the purchase. To help you keep track of how much you have left to pay, record your monthly repayments and any interest charged in your accounts we recommend that you: - Create new ledger accounts for record hire purchase fees.
- Record the original purchase using a journal. The journals may vary depending on whether you have used part-exchange.
- Record the re-payments, including any interest charged.
Before you record the hire purchase agreement, you need to create categories to record the values. We recommend you create the following ledger accounts:| Name | Nominal code | Category | VAT rate | | Hire purchase | 2300 | Current liability | No VAT | | Licences | 7301 | Overheads | No VAT | | Equipment hire and rental* | 7302 | Overheads | No VAT | | Hire purchase interest | 7901 | Overheads | No VAT |
If you’re already using any nominal codes above, just use different ones. We use the Category, rather than the Nominal Code to determine where the values appear on your reports. - From Settings, select Business Settings, click Financial Settings, and select Chart of Accounts.
- Select New Ledger Account.
- Enter the details and Save.
Part exchangeIf you want to part exchange an existing asset when purchasing a new one - follow the steps below. This is to remove the value of the exchanged asset from your balance sheet and record the purchase of the new asset. Here you buy an asset using a loan or hire purchase but without part-exchange.For example: - You buy a car for 12,000 including VAT
- In addition to this, you pay documentation fees of 50, an option fee of 25 and road tax of 150, giving a total of 12,225
- You pay a deposit of 500
- You use the Standard VAT Scheme and can reclaim VAT on the purchase
- From Adjustments, select Journals then New Journal.
- Enter the date and a reference for the journal and, if required, enter a description.
Enter the relevant information to record the hire purchase and Save. For example: | Ledger Account* | Details | Debit | Credit | Include on VAT Return? | | Motor Vehicles – Cost (0050) | Net value of new asset | 10000.00 | 0.00 | Selected | | VAT on Purchases (2201) | VAT on new vehicle | 2000.00 | 0.00 | Selected | | Motor Expenses (7300) | Document and option fee | 75.00 | 0.00 | Not selected | | Licences (7301) | Road tax fee for new vehicle | 150.00 | 0.00 | Not selected | | Current (1200) | Bank deposit paid | 0.00 | 500.00 | Not selected | | Hire purchase (2300) | Total purchase price less the deposit | 0.00 | 11725.00 | Not selected |
VAT on hire purchaseIf you can’t reclaim VAT on your hire purchase, include the VAT element of the purchase with the net value using the ledger account for the net value of the assets, for example, Motor Vehicles – Cost (0050). In some lease hire agreements, you can only reclaim 50% of the VAT. In this case, enter half of the VAT amount using the VAT on Purchases, ledger account and the remaining VAT to Equipment hire and rental. Sometimes you part exchange an existing asset for a new asset, such as when buying a new car or another vehicle.When you part exchange, you need to remove the value of your part exchanged asset from your balance sheet as you no longer own it. To record the part exchange - Record the disposal of the old asset.
- Move any depreciation you’ve recorded to your Sale of Assets ledger account.
- Record the purchase of the new asset.
- Reduce your hire purchase liability by the amount of the asset you’ve part exchanged.
In the following steps, we'll use this example: - You have a car that originally cost 6,000 and has depreciated by 4,000
- You buy a new car for 12,000, including VAT
- You part exchange your old car for 2,500
- In addition to this, you pay documentation fees of 50, an option fee of 25 and road tax of 150, giving a total of 12,225
- You pay a deposit of 500
- You use the Standard VAT Scheme and can reclaim VAT on the purchase
Record a journal for the purchase- From Adjustments, select Journals, then New Journal.
- Enter the date and a reference for the journal and, if required, enter a description.
Enter the relevant information to record the disposal of the old asset and clear your depreciation, for example: | Ledger Account* | Details | Debit | Credit | Include on VAT Return? | | Motor Vehicles – Cost (0050) | Disposal of old asset | 0.00 | 6000.00 | No | | Sale of Assets (4200) | Disposal of old asset | 6000.00 | 0.00 | No | | Motor Vehicles – Accumulated Depreciation (0051) | Disposal of old asset | 4000.00 | 0.00 | No | | Sale of Assets (4200) | Disposal of old asset | 0.00 | 4000.00 | No |
Enter additional information to record the hire purchase, for example | Ledger Account* | Details | Debit | Credit | Include on VAT Return? | | Motor Vehicles – Cost (0050) | Net value of new asset | 10000.00 | 0.00 | Yes | | VAT on Purchases (2201) | VAT on new vehicle | 2000.00 | 0.00 | Yes | | Motor Expenses (7300) | Document and option fee | 75.00 | 0.00 | No | | Licences (7301) | Road tax fee for new vehicle | 150.00 | 0.00 | No | | Licences (7301) | Road tax fee for new vehicle | 150.00 | 0.00 | No | | Current (1200) | Bank deposit paid | 0.00 | 500.00 | No | | Sale of Assets (4200) | Part exchange value | 0.00 | 2500 | No | | Hire purchase (2300) | Total purchase price less the deposit and part exchange | 0.00 | 9225.00 | No |
How to record paymentsWhen you record the payment, you'll need to separate the repayment and interest values. For example, if your monthly repayments are 300, where 250 of this is a repayment and 50 is interest. There are two ways you can do this. - Set up a recurring bank payment. If you're using bank feeds or importing from a bank statement, simply match the payment each period.
- Create a new Other Payment transaction from your bank feed or bank statement import each month.
Whichever method you use, remember to split the transaction across separate ledger accounts for the loan repayment and the interest. Your payment should be like this for a repayment total of 300 with 50 interest.
Create your first repayment- From Banking, open the required bank account.
- Select New, then Purchase / Payment.
- Select Other Payment.
- Enter the Date Paid.
- If required enter a reference.
- Select Amount Paid and enter
- Enter the required information to record the
| Ledger Account* | Details | VAT Rate | Total | | Hire purchase (2300) | Hire purchase repayment | No VAT | 250.00 | | Hire purchase interest (7901) | Hire purchase interest charged | No VAT | 50.00 |
Make the repayment recurringEdit the bank payment you've just entered. Select Make Recurring, then complete the following information: | Repeats every | Enter how often you want the transaction to repeat, then choose to repeat in a number of days, weeks, or months. For example, to repeat a payment every ten days, in the first box enter 10, then from the second box choose Days. | | Repeat Until | Enter the date of the final payment. |
[BCB:299:UKI - Personal content block - Dane:ECB][BCB:306:UKI - Search override - Accounting UK / IE:ECB] [BCB:276:UKI - hide back button:ECB] |
next to the relevant transaction.