Bank loan for new van
davesecor
Member Posts: 8
Hello
I’ve been using wave for the last 3 years and managed to handle all my (Sole Trader) requirements until now.
So my problem is I’ve just bought a new van for my business with a loan from my bank.
I did a lot of searching and found some information on how to enter these into wave. However I can’t seem to get it to work and my head is seriously hurting. Could someone please take me (by the hand) through entering these two items into my books? Feel free to point me to video’s and screen shots
Thank you
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Comments
davesecor,
The way you would do that is as follows. Example - You purchase a van for $25,500. Includes taxes and fees. You made a down payment of $1000 and finance the balance. Step 1 create accounts - you need an asset under property for Vehicles. Create an accumulated depreciation for Vehicles and create Vehicle Loan as a liability. Next Step Let's say the 1,000 down payment came from the business banking and was imported. You would code that transaction to Vehicle - Asset. Next create a journal entry to record the balance of the asset and loan. Debit Vehicle 24,500 and credit Vehicle loan 24,500. Your payments would be applied against the loan. As often as you would like, you would need to expense the interest portion of the payment. Let's say your payment is 385 per month with 50 for interest and 335 is principal. Your journal entry would be debit interest expense and credit Vehicle loan for $50. I'm assuming your are not in the US based on "Sole Trader" term and I do not know how depreciation is computed in your locale, but the entry would be debit depreciation expense $XX and credit accumulated $XX
Mike G, CPA
www.mgfinancial.net
@Mikeg
Hi Mike ,Thank you for taking the time to respond to my post for help. You guessed correct im from the UK.
There's a few thing I should have explained better in my original post.
A: Loan amount was £3600
B: Van was purchased using a combination of £2000 cash drawn from business account to owner and £1758.78 bank transferal to finance company ( he still owed HP)
I'm working through you reply and will post screenshots as I go and ask questions when I'm stuck if thats ok with you?Please jump in and tell me if i'm interpreting your instructions wrong.
Step 1 create accounts - you need an asset under property for Vehicles. Create an accumulated depreciation for Vehicles and create Vehicle Loan as a liability
(OK so far Mike?)
Next Step Let's say the 1,000 down payment came from the business banking and was imported.
(I didn't do a down payment. I just bought it outright with the bank loan.)
You would code that transaction to Vehicle - Asset.
Next create a journal entry to record the balance of the asset and loan. Debit Vehicle 24,500 and credit Vehicle loan 24,500. Your payments would be applied against the loan.
(Is this is right Mike?)
As often as you would like, you would need to expense the interest portion of the payment. Let's say your payment is 385 per month with 50 for interest and 335 is principal. Your journal entry would be debit interest expense and credit Vehicle loan for $50.
(Ill tackle this section next if everything is ok so far?)
davesecor,
From the above, and correct me if I'm wrong, the total purchase price of the van is 7,358.78. That is made up of the 2,000+1758.78+3600. If that is the case then I would think the debit for the loan (3600) would be Asset Van. That would make your van asset account agree to the total cost. Not sure I understand the account Mr David Brian King Trading (thinking that might be you)
Mike G, CPA
www.mgfinancial.net
HI Mike
Sorry I didn't explain it better.
The total purchase price of the van is 3758.78. That is made up of the 2,000+1758.78
I paid the seller £2000 cash( I withdrew from my business account)
I then paid the HP company £1758.78( bank transfer)
I used a business bank loan of £3600 to pay the above (the £158.78 coming directly from my business account (think you call them checking accounts))
Sorry Mike,
So are we saying what i have done so far is correct?
Mr David Brian King Trading is indeed me and the name of my business checking account
davesecor,
Gotcha. So then the journal entry you are making covers the deposit that was made from the finance company (loan proceeds). Is that correct? If so, then, yes I would agree with the above. Total cost of van would be 3758.78 with 3600 financed.
Mike G, CPA
Hi Mike
OK so first payment for loan has come out of m checking account and imported into my books. What do I categorize it as?
or do i delete it and make a new journal transaction ?
davesecor,,
On the dropdown, select transfer to bank/credit card or loan. Select your loan. When you want to expense the interest portion of the payment, you would debit interest expense and credit the loan. That should make your principal balance owed agree.
Hi Mike
Just wanted to say a big thank you for all your help
Kind regards
Dave
Your quite welcome