Solution Properties
Solution ID:
250624143859477
Last Modified Date:
Fri Jan 23 10:06:38 UTC 2026
Taxonomy Path:
Case category//How do I...//banking/reconciliation
Author:
[email protected]
Record a fixed asset bought using a loan or hire purchase (no part exchange)
Description

If you finance a fixed asset using a loan or hire purchase, you need to record more than just the purchase cost. You'll include fees, deposits, and interest, and track the outstanding liability. This guide shows you how to record the purchase using journal entries and how to set up the ledger accounts you’ll need.

Cause
Resolution

Step one: Set up the required ledger accounts

Before recording the purchase, create the following ledger accounts if they don’t already exist:

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

Step two: Record the purchase using a journal

Use a journal entry to record the asset, VAT, fees, deposit, and hire purchase liability.

Example

You buy a vehicle for £12,000 including VAT, and also pay:

  • Documentation fees: £50
  • Option fee: £25
  • Road tax: £150
  • Deposit: £500
  • You're on the Standard VAT Scheme and can reclaim VAT

Example journal entry:

Ledger Account Details Debit (£) Credit (£) VAT Return
Motor Vehicles – Cost (0050) Net value of asset 10,000 0.00 Yes
VAT on Purchases (2201) VAT on vehicle 2,000 0.00 Yes
Motor Expenses (7300) Document and option fees 75 0.00 No
Licences (7301) Road tax 150 0.00 No
Bank (1200) Deposit paid 0.00 500.00 No
Hire purchase (2300) Remaining amount owed 0.00 11,725.00 No

 

If you can’t reclaim VAT, include the VAT in the asset’s net value using the same fixed asset ledger account.

For lease agreements where you can only reclaim 50% VAT, post half to VAT on Purchases and the other half to Equipment hire and rental (7302).

Next steps

Once you’ve recorded the asset purchase, you can set up monthly repayments to track how much you owe and record interest costs.

Steps to duplicate
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