Recording a new business vehicle purchase with a loan involved requires careful attention to detail. Accurate bookkeeping is essential for maintaining a healthy business and avoiding any potential issues down the line. To make sure you get it right, follow these simple steps: Create new accounts:
The first step is to navigate to your chart of accounts and create the necessary accounts. You will need to create an asset account to track the new car's value, a liability account to record the new loan, and an interest expense account for future payments. When naming these accounts, keep clarity and efficiency in mind. For example, if you have multiple company vehicles, consider noting each asset and loan account with the make and model. If you only have one vehicle, use names such as "car loan" and "company vehicle." Create a journal entry:
Once you have created the necessary accounts, you will need to create a journal entry to record the asset and loan on your books. To do this, navigate to the "+ New" button and select "Journal Entry" if you are using QBO. When creating the journal entry, make sure to date it the day the transaction occurred for appropriate tracking and maintenance related to entries your CPA will likely handle. Debit the asset account for the total amount and credit the loan account for the total amount. Please note that if you made a down payment, both the asset amount and loan amount in the above journal entry should be less that amount. You will need to record the down payment in a separate expense transaction to match the activity that has or will soon clear and post to your QBO bank feed. Note sufficient details in the memo of this transaction for future reference and tracking. Then save and close. Record future car payments:
Once you have recorded the initial purchase, you will need to record future car payments. The method for recording these payments will depend on the payment method used. If you pay by card or a transaction that will clear your business account without a check written, you will create an "Expense" transaction in QBO with the bank account being where the payment clears from. There will be two lines on the transaction that will total the amount of the payment made, the first being the interest amount and the second being the actual loan account to record principal paid. Click save and close. Then match this to the payment when it clears your bank feeds. Remember, accurate bookkeeping is essential for maintaining a healthy business. At Faith Finance, we're always here to help you with your accounting needs. If you have any questions or need assistance, don't hesitate to reach out. We're here to support you and your business every step of the way.
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Disclaimer: The information provided in our accounting blog posts is intended for general informational purposes only and should not be considered as professional advice. Each company's structure and financial situation is unique, which may affect the applicability of the information presented. We strongly recommend consulting with your partnered CPA or financial advisor for personalized guidance on your specific accounting entries and financial management.
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