year end entries for vehicle loan

I would like to run something by everyone here in hopes of confirmation or correction...

I took out a loan for a vehicle in July of 2005. The loan was for $10,000. I did the following to set up the loan:

-created a Fixed Asset account for the truck and debited the amount of the loan (10K)

-created a Fixed Asset sub-account for accumulated depreciation

-created an Expense account for Depreciation

-created a Long Term Liability for the loan and credited it the amount of the loan

When I pay the loan each month I write a check for the payment amount and in the expenses tab, I use the long term liability account.

(this is where I want to check my procedures)

At the end of the year I plan to do the following:

-use the register for the Accum. Dep. account to debit the account

-make a general journal entry to credit the Long Term Liability account the amount of interest I paid on the loan for the year and debit the Interest Expense expense account.

As near as I can figure, this should bring all of my accounts up to date and make uncle sam happy. Have I missed anything and/or does this all seem reasonable?

Thanks to all.

Reply to
James Stewart
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You credit Accumulated Depreciation (not debit), and debit Depreciation Expense. Otherwise, that looks OK.

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Reply to
!-!

Concerning the OP situation/example What about the tax paid - is the asset account credited with the full amount including Tax? and how would one go about setting this up so that QBs provides accurate GST detail / summary?

Reply to
Michael

- From the "Uncle Sam" reference I assumed that GST does not apply.

- The asset account is debited, not credited.

- Since OP didn't ask about taxes, I didn't complicate my answer. Similarly he didn't mention a down payment, so neither did I.

- Treatment of taxes depends on the nature of the taxes. In Canada, PST and air conditioner tax should be recorded as part of the cost of the vehicle, but GST should not.

- If you are using a Canadian edition of QB with tax codes set up properly, just enter the transaction details with the appropriate tax codes in a Cheque or Bill transaction. If you use a General Journal Entry (which doesn't provide for tax codes), debit the GST/HST amount to the GST/HST account as a "Purchase" entry.

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Reply to
!-!

!-!, you have been a breath of fresh air and are really assisting me get the hang of Quickbooks. But I still have a few questions and I hope you can help me out concerning this topic.

Company A had this transaction Trailer Purchased for $73600 ($64000 + 9600 HST) Montly payments are $1,407.90 for 5 years Interest is at 5.90%

This is what I did, but after reading alot on this group I am not sure if it is right.

I set up a fixed asset account caller Trailer for $73600 I then set up a accumulated depreciation account as a sub account to Trailer I then set up (actually it was already there) a Depreciation Expense account I then set up an Interest Expense account

I then set up a Long term liability account called Loan - Trailer When I pay the loan each month I issue a cheque to the Loan - Trailer account I also issue a cheque to Interest Expense to cover the interest portion of the loan payment (they are itemized seperately on my bank statement as the loan payment comes out 2 days before the loan interest does)

Here is where I get confused if I am not already. How do I set up this transaction to record the HST so that it shows up in my HST / GST Summary? You mentioned using the bill transaction and this would work for recognizing the HST paid and seperates them perfectly, but how do I make payments on the loan if it shows up as a bill?

Anyway !-! if you could explain this transaction or show me the best way to set this up it would be so much appreciated.

Thanks,

Reply to
Michael

There is no GST/HST on loan payments, neither on principal nor interest.

Your asset cost should not include GST/HST. The simplest correction at this point would be a General Journal Entry: Debit HST Payable 9,600 Credit Trailer 9,600.

If you are using a recent version of QB, you will be asked to indicate whether the HST entry is on account of a purchase or a sale. Obviously you should select "Purchase".

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Reply to
!-!

Thank you !-! that worked fine for the purpose I wanted.

If it is not too much of an inconvenience could you explain how entering the purchase as a bill would work.

Taking this basic example. Purchase a computer for 5000 (HST included) Take a loan from the bank of 5000 to pay for it up front Make loan payments to the bank (I know loan payments and interest are not HST expenses)

If I wanted to set this up in QB's, (by the way I am using Quick books pro

2001) so that it sets up as a long term liability and a fixed asset item, but I want the HST to be calculated for my ITC's How do I use the bill entry to do this? or can I?

Thanks again,

Michael

Reply to
Michael

Enter a Bill payable to the Vendor for a total of $5000. On the Expenses tab, enter the Fixed Asset account and Tax Code "H"; QB should automatically calculate the net amount and the amount of HST.

Then pay the bill by setting up the loan. Depending how you have set up your Chart of Accounts there may be several ways to do this. One way is to "write a Cheque" to the Vendor. Enter Accounts Payable on the Expenses tab on the first line, tax code "E" or blank, Vendor's name in the "Customer:Job" column; enter Loan Payable on the next line and a NEGATIVE $5000 amount. The amount of the cheque will be "zero" and QB will not actually produce a cheque; you can enter "Loan" or "Computer" for the cheque number if you wish. Then go to Pay Bills, select the bill, and apply the credit (cheque). Instead of a cheque you could use a General Journal Entry if you prefer.

Instead of a Bill, you could record the entire transaction with a "zero" cheque - Enter the net amount $4347.83 to Fixed Assets, Tax Code H, and negative $5000 on the next line to Loan Payable. This is simpler than using a bill.

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Reply to
!-!

Reply to
Michael

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