Good afternoon, I bought a van this week through finance. I paid an initial payment of £3000 which was the VAT on the invoice and the rest I will be paying off through a finance loan. Is the best way to record this as a purchase for the full amount and then set up a bank account for the finance agreement and tag the bank transactions to this every month.
Any help and advise is much appreciated
There are a few posts on this subject here.
How you record this will depend on if your are a Limited company or sole trader and what type of loan was acquired? I.e. was it a hire purchase agreement or something like a bank loan?
Hi Matthew,
The business is a LTD company and it is a finance agreement. I’m not 100% certain exactly what the terminology is but i will be paying monthly payments for 4 years and at the end I own the van and there is no final payment, essentially a loan I guess,
Hi @nightfox122
It may be best to speak to an accountant on this one to ensure it’s recorded correctly. If you don’t have an accountant, one may be able to help here on the forum, or you may wish to contact one familiar with QuickFile: https://accountants.quickfile.co.uk
That sounds like a finance lease, in which case you will need to capitalise the van as a fixed asset, with the credit going to a long-term loan in the balance sheet. Monthly payments should then be split between capital repayment and interest, using an “effective interest rate”. The van should also be depreciated over its useful life.
Your accountant should be able to advise you exactly how to do this - or to do the calculations for you.
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