Hi,
The company I work with, purchased Plant Machinery through Hire Purchase financing. I made this Journal entry to recognise the Asset and the Liability:
Dr. 0020- Plant Machinery xxx
Cr. 2310- Hire Purchase xxx
I prepared a schedule for the monthly repayments and compute the monthly VAT and interest allocations. But my problem is when I tag the deposit payment and the subsequent monthly payments, I cannot use the account: 2310- Hire Purchase to debit the principal amount of the Liability. We would prefer creating an invoice rather than the miscellaneous posting because we need to claim the VAT. Can anyone please suggest a better option of doing this?
Thank you!
Let’s try this, book a purchase invoice for the asset at cost net vat value and vat amount under the vat column to reclaim vat on vat return, save the invoice, pay the invoice using HP liability a/c, and tag all monthly HP payments to this HP a/c and do an annual journal for interest element Dr. HP interest Cr HP liability
@FaradayKeynes
Thank you for this!
But the real problem is QF won’t allow us to use the HP liability a/c (2310) when tagging the monthly HP payments.
Okay, I think I got your point, but I thought we’re suppose to recognise the VAT and the interest on a monthly basis?
In addition, the monthly payments includes the VAT and the interest, so if we’re going to tag the payment to the HP liability through miscellaneous posting, we will be debiting the whole amount to the HP liability account.
You can open a Finance company loan account under the banking tab instead of using HP Account, this way you can tag monthly payments to HP company as inter-bank transfer
Yeah! I’d like to try this. Thanks a lot for sharing your time and your knowledge, it is much appreciated. Thank you @FaradayKeynes.
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