Setting up new vehicle purchase with a loan and downpayment

jmfcarpetmgr · ‎December 10, 2018

I am looking for help setting up in QB Pro 2015 a new van that we purchased. We did a down payment (2 checks actually) and financed the rest. I am not a bookkeeper and get confused and the debit and credit answers.

I went to set up a fixed asset account and the first part asked to categorize it as income or expense. Not sure which to choose.

Then I need to set up an account for the loan amount. Should it be a loan account or a long term liability account? And do i include the amount financed or the total amount with the interest costs? Where do i account for the deposit on the van? One was for $1000 and one was for $9000. I posted them temporarily in the fixed asset area, but not sure if that is correct. (I can always change it)

I have set up other loans but not sure that i have done it correctly.

We dont do depreciation thru QB. Our accountant and tax preparer does that when we do our taxes.

since i don't really understand all the ins and outs of bookkeeping I would need to be walked thru it very simply. but walked none the less. sorry!!!

But any help would be greatly appreciated!!

Thank you!

Rustler · ‎December 10, 2018

@ jmf

ROFL - and here is my way to do it

in the chart of accounts create the following
fixed asset van
fixed asset sub account name accumulated depreciation van
long term liability account named van-loan

On the sale document you have several summary numbers
total sales price, amount financed

Since you wrote two checks we have to do part of this twice
enter the check for 1K and use the fixed asset van account as the expense for the check

use write checks again, on the expense tab
line 1 - fixed asset van account, enter the total amount less 1K (the amount you already entered)
line 2 - select the long term liability account van, enter the total amount financed as a negative number

the check should now equal the 9K you paid, save

done

You need, need to enter the annual depreciation your tax guy calculates, or your P&L will not support your income tax return. And keep in mind, stuff happens, his file for your taxes and those calculations can be corrupted, or any other number of things. Your financial records, are just that yours, and an audit comes to you, not your accountant, assuming you have the same accountant years down the road when an audit happens

View solution in original post

Rustler · ‎December 10, 2018

@ jmf

ROFL - and here is my way to do it

in the chart of accounts create the following
fixed asset van
fixed asset sub account name accumulated depreciation van
long term liability account named van-loan

On the sale document you have several summary numbers
total sales price, amount financed

Since you wrote two checks we have to do part of this twice
enter the check for 1K and use the fixed asset van account as the expense for the check

use write checks again, on the expense tab
line 1 - fixed asset van account, enter the total amount less 1K (the amount you already entered)
line 2 - select the long term liability account van, enter the total amount financed as a negative number

the check should now equal the 9K you paid, save

done

You need, need to enter the annual depreciation your tax guy calculates, or your P&L will not support your income tax return. And keep in mind, stuff happens, his file for your taxes and those calculations can be corrupted, or any other number of things. Your financial records, are just that yours, and an audit comes to you, not your accountant, assuming you have the same accountant years down the road when an audit happens

john-pero · ‎December 10, 2018

Even if you calculate your own depreciation quick books lacks the capability unless I am missing something huge to show in a tabulated format all of the depreciation taken and when and which type as well as how much is left over. This is partly due to depreciation calculations are off books and only added once determined.

Rustler · ‎December 10, 2018

I did not say QBDT or QBO calculates depreciation
what I said was that the data needs to be in the company data file
depreciation always calculated outside QB and is a journal entry in both QBDT and QBO, debit deprec expense, credit accum deprec

If you have the cost basis in one FA account, and the accumulated depreciation in a sub account, per item being depreciated - the book value is right there.

Whether that information is presented as a table in a report, is just someone's preference on reporting

If accumulated depreciation for ALL fixed assets is being posted ONE account - that is also a choice - I think that choice is wrong - but that is an opinion and not a rule.

john-pero · ‎December 10, 2018

"the first part asked to categorize it as income or expense. Not sure which to choose." It is either or as far as sections on the create account page. Skip to lower part select Fixed Asset. Describe but DO NOT enter a beginning balance. Same with the Van Loan liability, create the account. Select Loan and in next screen change the dropdown to Long Term Liability, Now make a journal entry First line debit purchase price to the asset account Lines 2+ sales tax, doc fees, title, etc debit post to asset account. Down payments post credit to asset, they will reverse in the actual checks Lat line credit the Loan face amount At this point everything should balance. Save and go to your checks, make sure each posts to the asset. Interest is only posted in the monthly payment checks - or once a year recap.

Anonymous · ‎December 10, 2018

Yes there's a few steps in this:

From Lists: Cart of Accounts, add 2 new accounts - 1 fixed asset type for the vehicle, 1 long term liability for the loan.

From the Vendor Center setup 2 new vendors: for the car seller, and the finance company.

Create a Bill from the car dealer for the full price of the car with all associated costs, and apply sales tax codes to get the total due - you should have a complete invoice from the dealer. Code the costs to the new fixed asset account.

Delete the 'deposit' cheques and reenter them as 'bill payments' to the car dealer applied to the purchase bill.

Create a vendor credit memo to the finance company for the amount remaining open on the car purchase bill. This is the amount you have borrowed. Code this to the new loan liability account.

Now enter the offset: "pay" the bill to the car dealer, then 'receive a refund' from the finance company - same amounts. Use an inactive bank account if you have one.

Monthly loan payments to the finance co then need to be split between principle & interest. If they have given you a schedule of those amounts then use that. If not, you can estimate that the principle is being paid evenly over the number of payments - and the remainder of the monthly payment is expensed as interest. The principle portion is charged to the new loan liability account. The interest is an expense.

rae2586 · ‎May 01, 2019

How do you :

Delete the 'deposit' cheques and reenter them as 'bill payments' to the car dealer applied to the purchase bill.

Create a vendor credit memo to the finance company for the amount remaining open on the car purchase bill.

We purchased a new vehicle and I am stuck how to delete the 'deposit'

Mark_R · ‎May 01, 2019

Hello there, @rae2586.

Let's go to the bank register to delete the deposit from there.

But before we proceed, I suggest seeking help from your accountant if doing this won't affect your books.

To start with, you can follow these steps on how to delete deposit:

Go to Banking.
Select Use Register.
Choose the Bank Account, then click OK.
Find and select the deposit transaction.
In the toolbar, click Edit.
Hit Delete Deposit.
Click OK to confirm.

Once deleted, you can re-enter them as bill payments and create a vendor credit. But please make sure that you've entered it correctly.

Here's how you can do it:

Click on the Vendors menu.
Select on entering Bills.
Click on Credit.
Fill in the necessary information.
Click Save and close.

Once done recording/creating the vendor credit and the vendor bill correctly, you can now open the bill and pay it.

Open the Bill.
Click on Pay Bill.
To apply for the vendor credit, click on Set Credits under the Number of Credits section.
Click/select the vendor credit under Discount and Credits.
Click Done.
Click on Pay Selected Bills.

For your reference about paying bills and setting credits on QuickBooks Desktop (QBDT), you may check this article: Pay bills in QuickBooks Desktop.

In case you need tips and related articles in the future, visit our QuickBooks Community help website for reference: QBDT Self-help.

Please feel free to add a post/comment below if you have any other questions. I'll be always here to help you. Have a great day ahead!

donaldgreer · ‎September 20, 2019

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boyd0000a1 · ‎October 11, 2019

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Protocol2000 · ‎February 26, 2020

Hi ROFL, I have a similar situation, thanks for all your knowledge. My question is if I enter all of those numbers as a JE? Thank you in advance for your reply.

suacim · ‎February 27, 2020

I just wished the person asking the original question also wanted to know about interests since I am also interested in knowing how to enter the interests part. Hope someone can tell me, and hope quickbooks warns me when there is a reply, somehow.

suacim · ‎February 27, 2020

I would love that you explain to us how to do it in qbo as a journal entry, because it certainly has its differences even tho the core of it all is the same

ramhydraulic · ‎July 07, 2020

I have the same situation here, but using QBO - I get lost on the offset. I paid the bill to the dealer, but how do I receive a refund from the finance company? I only see customers when I try to receive a refund.

rh33663366 · ‎August 25, 2020

So when time come to make the monthly bill, how is paying the principal and interest will overflow or reflect on the Car dealer account?

Sharongn · ‎September 02, 2020

Interest will be booked to "loan interest" account, which is an expense. The only thing that will affect your loan account (liability) is the principal amount. So when you write the check, you will have two lines. For example:

loan principal: $500.00

loan interest: $25.00

Total check: $525.00

King-Brown · ‎September 23, 2020

Hello @Rustler, please explain this process with no down payment, just as a monthly payment as this was not addressed. The accounts were created for fixed asset = Automobile Finance, fixed asset sub account = Auto Accumulated Depreciation and long term liability account = Automobile Loan. My Amount Financed is $23,178.94 and the Finance Payment Total is $36,717.12 = Finance Charge $13,538.18. The first check payment was done and the "down payment" check scenario is confusing not knowing if it applies to monthly payments. The dollar amounts are included to find which accounts to apply them to. Also saw a comment here about interest charges or APR if it applies to this.

Thanks

Sharongn · ‎September 23, 2020

You don't book interest until you pay it. The loan principal is deducted as you pay it monthly.

Using your example:

Automobile Loan = $23,178.94 beginning balance

Payments are as follows:

Create check:

Reduce "Automobile loan" by loan principal amount (say $500.00)

Increases "Loan Interest" (expense account) by interest for that month (say $25.00)

Check total = $525.00

Hope this is what you are looking for.

Sharongn · ‎September 23, 2020

Initial Transaction (journal entry):

Fixed Assets -> Automobile Finance: debit $23,178.94

Long Term Liability -> Automobile Loan: credit $23,178.94 (principal only)

1st Payment:

Write check - Under expense tab enter as follows:

Long Term Liability -> Automobile Loan: monthly principal amount

Expense -> Loan Interest: monthly interest amount

This reduces the Automobile Loan amount and increases Loan interest on a monthly basis.

Monthly Depreciation (journal entry):

Depreciation -> Auto Accumulated Depreciation: credit

Expense -> Depreciation: debit

This is how I do it.

Tipper · ‎November 05, 2020

Trying to enter new vehicle purchased as a asset, and the loan liability for the financed portion. Been reading this old response over and over. My question comes down to this: Should the amount shown for the Fixed Asset for the truck be: just the Amount Financed? Or the Amount Financed plus the Interest we're paying? If just the amount financed, how do I show the correct starting balance for the Loan Liability account? thank you if you get this.

Andy5965 · ‎January 14, 2021

Hi - I read thru this entire thread and go it fine. However, the Fixed Asset vehicle does not show in the Balance Sheet. I've read a lot of threads about FAM and such, but FAM seems to be an over kill for just one auto. Plus I don't have FAM and wouldn't even know how to use it.

Can you tell me how to make this Fixed Asset show on Balance Sheet?

IamjuViel · ‎January 14, 2021

You've come to the right place, @Andy5965.

The Fixed Asset Manager is a feature that allows you to calculate the depreciation of fixed assets based on the standards published by the IRS. This is available in QuickBooks Desktop Premier Accountant, Enterprise, and Enterprise Accountant can be accessed under single-user mode.

First, let's switch to single-user mode. Here's how:

Go to the QuickBooks File menu.
Select Switch to Single-user Mode.

Now, you can start setting up the QuickBooks Desktop Fixed Asset Manager:

Set up the Income Tax Form
Set up General Ledger (G/L) Account in QuickBooks Desktop
FAM Client Wizard
Add Asset in Fixed Asset Manager

You can visit this article for more detailed steps: Set up Fixed Asset Manager (FAM).

On the other hand, you'd want to make sure you've recorded your vehicle-related transactions to the Fixed Assets account. This way, the Fixed Assets account will show on the Balance Sheet report. You can read through these articles to learn more about the step-by-step process:

Lastly, I'd recommend consulting with your accountant so you'd be assisted in reviewing how your Fixed Asset account and related transactions were entered in QuickBooks.

Keep me posted if you have other questions about using QuickBooks to manage your assets and other business-related transactions. The Community and I are always here to help.

Andy5965 · ‎January 14, 2021

Hi - I really appreciate your quick reply. But where is the FAM???? I am using QBD Premier Manufac & Wholsale Edition 2018. In Single User Mode. For the life of me, I cannot find a FAM. Even searched in QBD for FAM, no luck. In another thread it said "open Accountant menu... " well my QBD doesn't have an Acountant menu or is it hidden and I am not seeing it.

So, where is the FAM? How do I start it?

Thanks.

Angelyn_T · ‎January 14, 2021

Thank you for getting back, @Andy5965.

Allow me to share additional insights about the Fixed Asset Manager (FAM).

Currently, FAM is only available in QuickBooks Desktop Premier Accountant, Enterprise, and Enterprise Accountant. If you need to use this feature while managing your business, you can consider upgrading to a higher version of QuickBooks. Here's the download and updates link: https://downloads.quickbooks.com/app/qbdt/products.

To learn more about FAM, I recommend checking out these links:

Moreover, I've added these articles for more tips about managing accounts in QuickBooks Desktop:

If you have any other questions while working with QuickBooks or fixed asset accounts, please let me know by adding a comment below. I'm always here to help. Keep safe always!

Andy5965 · ‎January 14, 2021

Got it. Well,upgrading is not an option at this time. Is there ANY way to make Fixed Assets show in the Balance Sheet without FAM? I only need it because TurboTax is asking for it. I am already handling my depreciation without a problem.

Thanks,

Andy

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