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Join nowSo I bought some equipment about 4 years ago, and paid in full 2 years ago. However my bookkeeper never recorded the asset's price, just the loan payments. How do I fix that? Just make a journal entry for Equipment and leases payable?
Funnily enough, this guy did the same thing for a different loan 5 years ago. He added the payments, but never the balance of the loan in my assets. Is the journal entry the same thing for the above. And how does this affect taxes?
First i'm going to assume that you are using the words 'loan payment' correctly and there were no operating leases involved ...
So you say the loan payments were recorded - as what? Either: equipment asset, debt payment, or expense.
If the loan payments were recorded to equipment asset then the process was wrong, but the net outcome is (almost) right. I wouldn't change it now for items 2 years past.
If the payments were to pay a loan liability, then go back further an find what was the original offset to create the loan liability - it should have been the original equipment purchase - in which case (again) the final outcome is already correct.
The only 'wrong' situation would have been if the 'loan payments' were recorded as some type of expense. In that case you now may have an unrecorded asset, and have over recorded prior expenses. Depending on the value of those assets it may require a correction, which would be to recognize some value for the asset and reduce the expenses. That could be done within this year, or be backdated into prior years. At this point you'll need some professional advice to determine the tax consequences: possible prior taxes payable and the costs of refiling. If the equipment wasn't too valuable, and/or if it could have been amortized over the subsequent years to little current value, then you might just decide to sweep the entire issue under a big carpet.
They were recorded as leases payable and thus an expense. So I had a negative leases payable account. There was nothing to offset the account, so it wasn’t paying down anything.
So is the last paragraph the relevant option?
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