Record the purchase of an asset by means of partner's contributions and a loan

Maylinw · ‎January 24, 2022

My client is a partnership and they purchased a truck for $34,000. The three partners split a cash payment totaling $10,200. They got a loan for the rest. How do I properly record this transaction? My thought is to first create 2 accounts. One is a long-term asset account for the paint truck, and the 2nd is a liability account for the paint truck loan. I know I need to create a JE to apply each partner's cash contribution ($3,400 each) but I'm stuck on how to properly do this. Also, the monthly payment for the loan is $1,227 so I am not sure how record this either.

Rustler · ‎January 25, 2022

Create the fixed asset account for the truck, and a sub fixed asset account for truck accum depreciation

Create the long term liability account for the loan

Where did the partner money come from, if from personal finances, show a journal entry per partner as a deposit to the cash account (debit) and use partner equity investment as the other account (credit)

then from the cash account make a payment for the total 10,200 and use the car fixed asset account as the expense (reason) for the payment

then a journal entry, debit the fixed asset account and credit the loan liability account for the amount of the loan.

Payments are made to pay down the loan, and part of that payment is interest expense.

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Rustler · ‎January 25, 2022

Create the fixed asset account for the truck, and a sub fixed asset account for truck accum depreciation

Create the long term liability account for the loan

Where did the partner money come from, if from personal finances, show a journal entry per partner as a deposit to the cash account (debit) and use partner equity investment as the other account (credit)

then from the cash account make a payment for the total 10,200 and use the car fixed asset account as the expense (reason) for the payment

then a journal entry, debit the fixed asset account and credit the loan liability account for the amount of the loan.

Payments are made to pay down the loan, and part of that payment is interest expense.

Maylinw · ‎January 26, 2022

Thank you! I entered everything as you explained it and so far so good in the CoA. Now, a first payment has already been made on the loan. After I record the payment, do I then create a JE each time to debit the loan account and credit the cash (bank) account?

LeizylM · ‎January 26, 2022

Thanks for getting back to us, Maylinw.

Yes, you'll need to create a Journal Entry each time to debit the loan account and credit the cash bank account. With the whole process, I still suggest reaching out to your accountant so they can help you identify the next steps you might be doing.

For additional information on this, I recommend the following articles:

Feel free to mention me in your reply if there's anything else that you need assistance with. I'm just around the corner to help. Have a nice day!

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Record the purchase of an asset by means of partner's contributions and a loan