Hi all, could I ask for help on the following entries? This is more complex than the usual finance/loan entries that I am used to.
(Sorry for long post)
Asset bought and paid for in full by my client using own capital. *£72,200 plus VAT. This is entered into the ledgers. VAT entered on VAT return but VR not yet submitted.
(*the original payment for asset was £300 plus vat less than the new invoice from finance company)
Client then wants to raise some money using asset to recoup some of the capital used to buy asset so:
Hire Purchase Finance using the asset:
New invoice raised from finance company (to client) for complete cost of asset £72,500 plus vat £14,500
New invoice raised by client (to finance company) for sale of (PART) of the asset for £43,500 plus VAT £8700
Finance company pays loan money of £43,500 into business account
Finance company agreement is deposit, from client, as £43,500 cash deposit (NB: not actually cash deposit as the collateral in the asset is being used as deposit so no cash leaves the business bank account)
I Don’t know how to enter a deposit that is not from bank, would I perhaps credit asset ledger £43,500, debit finance/loan ledger £43500?
Do I remove the original entry for the asset fully paid for (debit bank £87000, credit asset ledger £72200, credit VAT £14,440) and then re-enter the finance company’s invoice for £72,500 plus VAT £14,500?
I am unclear on the journal/ledger entries for most of this. There is a VAT element too in which the £8700 VAT on the Sales Invoice raised by client is not paid.
It would seem that the asset is no longer owned by my client (I am waiting for client to confirm this) as £43500 is on HP finance and the remaining £43,500 is used as a deposit and to confuse me even more, there is still the VAT element in these figures of £14,500.
I would be deeply grateful for any help on this as my brain is now frazzled as I have been thinking about it non-stop for several days.
Thank you in advance.