Adding Vehicle Asset with Loan Note

travis88

For proper accounting purposes, are the below steps correct to create a vehicle asset and associate it with a financing loan/note?

1. Create a new loan account under Accounting > Chart of Accounts > Liabilities & Credit Cards > Loan and Line of Credit called "Vehicle Loan"
2. Create a new asset account under Accounting > Chart of Accounts > Assets > Property, Plant, Equipment called "Vehicle 1"

And then under Accounting > Transactions create a journal entry for the starting balance which will;

• DebitCredit $100,000 to account Liability > Vehicle Loan
• CreditDebit $100,000 to account Asset > Vehicle 1

And subsequent transactions for the loan repayment (assuming no interest) will be journal entries as follows;

• CreditDebit $2,000 to account Liability > Vehicle Loan
• DebitCredit $2,000 to account Assets > Business Checking Account

Mikeg

travis88,
Step 2 (booking asset) and 3 (payment of loan) are backwards.
Mike G, CPA
www.mgfinancial.net

travis88

@Mikeg you mean when adding the asset I should debit the amount to the vehicle instead of credit? Shouldn't the loan account always have a negative balance?

Mikeg

The entry would be debit the asset (increase an asset) and credit liability. (increase a liability) Your payment would be debit the liability ( reduces) and credit cash (reduces an asset)
Liabilities have a credit balance and can be a bit confusing when looking the balance sheet because the have a positive number.
Mike G, CPA
www.mgfinancial.net

MapleLane

Hello Everyone,

I hate to bring up an old thread but I have a question and this seems like a great place. On the repayment transactions, how is the transaction that is imported with your business checking (let's assume this is where you pay the loan) categorized?

_And subsequent transactions for the loan repayment (assuming no interest) will be journal entries as follows;

Debit $2,000 to account Liability > Vehicle Loan
Credit $2,000 to account Assets > Business Checking Account_

If I add another journal entry as outlined, won't the imported transaction be a duplicate, should that be deleted?

Thanks in advance!

Mikeg

@MapleLane,
If your loan payment is being imported from banking then you would categorize to the loan (liability). The original post seemed to indicate manual transactions are being added.