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Established Member

Actual Cash Value vs Trade Allowance

We are a used vehicle dealership and I am having the issue of invoicing customers who have a trade.  We put a trade allowance on a vehicle being traded for another vehicle and on the back end we will give it an ACV (actual cash value) which typically results in a loss of profit.  From all the forums I have read, it says I should receive payment against the invoice for the trade allowance and to create a dummy bank account for it to be deposited into and then turn around and pay for the trade in inventory out of that same dummy account.  My question is how and where do you record the loss between trade allowance and the ACV ? 

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Established Community Backer ***

Re: Actual Cash Value vs Trade Allowance

There is no loss to record.

 

The used car you get in trade has the value of what you allowed as the trade in. NADA value has nothing to do with it. If you allow 1K as a trade in - you have a car worth 1K sitting there - that is what it cost you.

 

When you sell that car, you either make money or not - that is the point where any loss would post to the accounting.