Forum

• # 74672
• Tue 27 Sep 2011 09:06 AM

I am a relatively new book-keeper who has have recently taken on the book-keeping for a sole trader.   He has two vans (one purchased and one on lease).    I am unsure how to account for the leased vehicle and the monthly payments. Is it a fixed asset at the outset or does it become a fixed asset once the lease payments have finished. Guidance would be very much appreciated.

Edited at 27 Sep 2011 09:15 AM GMT

• 
  Quote
  

• # 74675
• Tue 27 Sep 2011 10:57 AM

Hi Christine,

It is a fixed asset from the start. The way I currently post them are (Figures are plucked from nowhere!);

DR Motor vehicle £10000
CR HP Loan £10000

(accounting for VAT where necessary - usually you pay this as the deposit)

Then when monthly payments are made I post as follows;

DR HP Loan £100
DR HP Interest £10
CR Bank £110

There are possibly other ways of posting the payment i.e. Dr the whole amount paid to HP loan, the do a journal fpr the interest;

DR HP Loan £110
Cr Bank £110

HP Journal;
DR HP Interest £10
CR HP Loan £10

Hope this helps and makes sense!

regards

Kerry

EDIT; Remember that my figures above are just plucked out of nowhere and you will have your exact values :)

• www.berrybookkeeping.co.uk
  
  My responses are based on my opinions, not necessarily facts.
• 
  Quote
  

• # 74692
• Wed 28 Sep 2011 09:01 AM

Christine

The treatment of the leased van will totally depend on the contract for the lease.

It could be a straightforward lease in which they will never own the van in which case it would always be an expense and never become an asset.

If your client is a limited company and it is a lease purchase then it it would be treated as a balacen sheet item with any interest on the lease being charged to the P&L.

The most important thing to establish before you start is will the van ever be owned by the business.

Now as for an assumption on my part as your client is sole trader he would not usually have a lease purchase it would more likely to be Hire purchase which would lead to to believe that the van will never be owned and is therefore should not be shown on the balance sheet but expensed.

Kerry please be a bit more careful when answering questions if they are not so black and white as people will take your answers as complete which in this case your answer was not.

Kind regards
Stuart

Edited for Spelling

Edited at 28 Sep 2011 12:27 PM GMT

• Forum Moderator, South East & Greater London Regional Chairman
• 
  Quote
  

• # 74694
• Wed 28 Sep 2011 09:20 AM

Stuart Wildmansaid:

Kerry please be a bit more careful when answering questions if they are not so black and white as people will take your answers as complete which in this case your answer was not.

Kind regards
Stuart”

• www.berrybookkeeping.co.uk
  
  My responses are based on my opinions, not necessarily facts.
• 
  Quote
  

• # 74705
• Wed 28 Sep 2011 12:36 PM

Kerry

I thought your advice on the posting was excellent it was laid in a clear fashion  that was easy to follow.

You accountant is correct if the van is being bought on HP then it is owned by you and therefore should show as an asset for the van and liability for the Loan (HP) with the interest going to the P&L which your postings demonstrated excellently.

The problem came as it was not that clear if the van would be owned or is the property of the leasing company, I worked for a Courier company some years ago we never owned a van we leased them for 3 years then paid a peppercorn rent at the end of the rental period.

Hence why I felt it need to made clear that christine needed to establinsh ownership first.

We need people like you who do make a positive contributiuon to this forum and my comment was only from previous experiences where I have fallen into the same trap myself.

Warmest regards
Stuart

• Forum Moderator, South East & Greater London Regional Chairman
• 
  Quote