Checking your Chart
Of Accounts.Hire Purchase Agreements (Including Part Exchange)
Your business will probably enter into a hire purchase agreement at some point, for example, when buying a company car or purchasing office equipment. This section describes the recommended procedure for recording a hire purchase agreement for the purchase of a car, including part exchange.
Recording hire purchases consists of:
Checking your Chart
Of Accounts.
Recording the disposal
of the car being replaced and the initial hire purchase agreement.
Setting up the monthly repayments (i.e. the
interest payment and the loan
repayment).
You can record your hire purchase agreements in your Sage Line 50 program through a series of journal entries. Use the skeleton journal Sage Line 50 has created for you to record your transaction.
To illustrate how to record your hire purchase agreements in Sage Line 50 we have used the example given below:
Your company buys a new car for an on the road price of ú8458.53 including VAT. Your bill also includes documentation fees of ú50, an option fee of ú25, as well as road tax at ú150.You pay a deposit of ú500 and receive a part exchange worth ú1300 for your old vehicle. Your interest repayments work out at ú1669.53 to be paid over four years.
The vehicle you are part exchanging originally cost ú4000 but has depreciated by ú3000. Therefore the net book value of the vehicle is ú1000.
Related Topics
Preparing to Post your Hire Purchase Journals
To Record the Hire Purchase Agreement
To Record the Monthly Hire Purchase Interest Charges