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Vehicle Loan Settings?

HoustonHouston Member Posts: 18

Morning all! I was reading some past discussions about this subject and couldn't not find the correct answer, but I found some that came close. Sooooo here we go!

I bought a newer vehicle for my company for 23k. And the bank gave me a 8k loan (not including the interest) for it, but never put the money in my account. They did take out 15k of my business account that paid the remaining . Handed me the check for 23K and I went to the lot and bought it.
So the question is how is this categorized?
They will be deducting 160.00 a month from my account coming up. I currently have that 15k withdrawal listed as a Asset (Other Long Term Asset).
I'm still in Accounting 101 class (Newbie), so go easy on me LOL!
I do understand apples and oranges = simple language!

Much appreciated!

edited April 17, 2020 in Account Settings Technical Support

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    MikegMikeg Member Posts: 995 ✭✭✭

    @Houston,
    You will need to do a journal entry to debit the asset for 8k and credit Auto Loan Payable (create in chart of accounts) for 8k. When you make a payment you would categorize the payment to the loan. At whatever interval you want, you would do a journal entry to expense the interest portion of the payment. Excel has a template to create an amortization schedule for the loan. You can use that or any other number of free amortization calculators on the internet. The entry for that would be debit interest expense and credit the loan. Your loan balance should agree to the amortization schedule.

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    HoustonHouston Member Posts: 18

    You will need to do a journal entry to debit the asset for 8k and credit Auto Loan Payable (create in chart of accounts) for 8k. (WHAT DO I CATEGORIZE THE 8K UNDER IN THE CHART OF ACCOUNTS? AND IS THE CURRENT LOCATION OF THE DOWN PAYMENT/WITHDRAWAL 15K IN THE RIGHT PLACE?)

    When you make a payment you would categorize the payment to the loan. (WHERE DO I PUT THAT LOAN IN CATEGORIES?)
    At whatever interval you want, you would do a journal entry to expense the interest portion of the payment.
    (I HAVEN'T EVER DONE A JOURNAL ENTRY SINCE STARTING 2 WEEKS AGO....)

    Excel has a template to create an amortization schedule for the loan. (??????)

    You can use that or any other number of free amortization calculators on the internet. (??????)

    The entry for that would be debit interest expense and credit the loan. Your loan balance should agree to the amortization schedule. (I KNOW WHAT THE TOTAL AMOUNT OF 8K IS WITH THE INTEREST. 159.90 FOR 59 MONTHS AND THE LAST PAYMENT OF 159.63. TOTALING 9593.73. CAN I JUST PLUG THAT NUMBER IN SOMEWHERE? AND DEDUCT FROM THAT?)

    THIS MAY BE TO DEEP FOR ME LOL!

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    HoustonHouston Member Posts: 18

    I appreciate your input, but I don't get it. I'm guessing I'm at a stopping point... Still shaking my head at what to do... if anyone and I'm sure there are many that know what I'm trying to get done will chime in and really dumb this down, I can use the advice!
    Thanks all!

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    MikegMikeg Member Posts: 995 ✭✭✭
    Your first step is to create a liability for the loan. Go to Accounting/Chart of Accounts then liabilities. Add new and call it auto loan.
    Next, create the journal entry. Go to Accounting/Transactions- upper right under more. You want to debit the asset where the 15k is and credit auto loan for 8k.
    An amortization schedule tells you how much interest and principal you are paying every month. One should be created so that you know how much interest expense you have.
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    HoustonHouston Member Posts: 18

    *Your first step is to create a liability for the loan. Go to Accounting/Chart of Accounts then liabilities. Add new and call it auto loan. (I GOT IT!)

    *Next, create the journal entry. Go to Accounting/Transactions- upper right under more. You want to debit the asset where the 15k is and credit auto loan for 8k. (THAT 15K WAS WITHDRAWN FROM MY ACCOUNT, FROM THE BANK. IT WAS MY MONEY TO BEGIN WITH THAT I WAS PAYING ON THE ON THE VEHICLE MYSELF.
    ALSO THE 8K LOAN WAS NEVER PUT IN MY ACCOUNT. THE BANK JUST PUT THE 8K LOAN WITH MY 15K AND WROTE THE CAR LOT A CHECK. DOES THAT MAKE ANY SENSE?)

    *An amortization schedule tells you how much interest and principal you are paying every month. One should be created so that you know how much interest expense you have. (I'M STARTING TO UNDERSTAND WHAT YOU MEAN THERE)

    ** IF YOU CAN TELL ME ABOUT WHAT TO DO ABOUT THAT JOURNAL ENTRY IN THE 2ND PARAGRAPH. I TRIED EXPLAINING A LITTLE MORE BETTER ABOVE ABOUT THE ISSUE. THANKS!

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    MikegMikeg Member Posts: 995 ✭✭✭
    Yes, sounds like a bank check aka cashiers check. Your asset cost should be the 23k. The 15k payment should be categorized as autos on the balance sheet. The 8k journal entry I gave you makes up the difference between what was withdrawn and the amount you paid.
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    HoustonHouston Member Posts: 18

    I'm gonna give this a swing Mike and see if it falls together pal. I appreciate your patience in this matter. Many thanks!
    Houston

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    MikegMikeg Member Posts: 995 ✭✭✭
    No problem. I would however suggest you hire someone to review to be sure everything is correct. Sort of like you reviewing someone’s wiring before turning the switch on.
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    HoustonHouston Member Posts: 18

    Hahaha! Well put!

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    ATuretskyATuretsky Member Posts: 3

    @Mikeg

    Thanks for you info above, I am in a similar situation to Houston. Currently following your steps above. 1, create a new liability account listing for the name of the loan. 2) making an initial journal entry for the vehicle.

    I paid $3500 out of pocket, and got a loan for $9216 (even $256 payments every month for 36 months).

    The problem I am running into is having an unbalanced journal transaction. I put the $3500 down payment that was pulled from my account as a debit to my checking acct. Then I put the $9216 loan as a credit to the new car loan liability you said to make.

    Is there a third transaction I need to add to this journal entry in order to balance it out?

    Thanks! Aaron

    edited March 25, 2020
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    MikegMikeg Member Posts: 995 ✭✭✭

    @ATuretsky,
    It would not be correct to debit cash. Do you have Wave attached to your bank? Meaning is the 3500 already on your transaction register?

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    ATuretskyATuretsky Member Posts: 3

    Yes the 3500 is already showing up in my transactions and I categorized it as an Auto Expense. Does that mean I only put the $9216 loan details in the journal transaction and disregard that out of pocket cost?

    Thanks for your help, up until now I have been using wave as more of a transaction organizer, and am looking to go in a little deeper for my full financial picture.

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    MikegMikeg Member Posts: 995 ✭✭✭

    @ATuretsky,
    If you haven't already done so you should create an asset under Property, Plant and Equipment called Vehicles or Autos, whatever suits you. Next, categorize the 3500 to that account. Next Debit that same account for the 9216 and Credit the Loan - Toyota for the same amount. Sounds like your purchase price was 12,716 which should agree to the bill of sale. Post all monthly payments against the loan. At whatever interval you deem necessary, you would debit Interest expense and Credit the Toyota loan to classify the interest you paid as an expense.

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    ATuretskyATuretsky Member Posts: 3

    Gotchya! That makes sense. I have one more question before I dive in. We also have a vehicle that is a lease, with a similar situation. Down payment, monthly payments towards loan for the remainer. Would that set up the same?

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    MikegMikeg Member Posts: 995 ✭✭✭

    @ATuretsky,
    That is going to depend on whether it is a lease to own or not. If it is not, then you expense your lease payments and do not capitalize the asset. It does not belong to the business because it is returned after the lease period expires. If at the end of the lease you own then yes, set up like the other.

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