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A questions about hire purchase on a van

a Director has taken a hire purchase on a van out in his personal name but the finance payments debit his limited company account. As the company is fairly new, it was not granted finance. How would I treat the lease payments of the van in the company accounts?  Essentially the company is paying the lease for the director! He didn’t seek my advice before going ahead with the van purchase! I would be most grateful for your views. 

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06th Dec 2018 21:52

So if he had sought your advice before going ahead, what would your advice have been? Surely it would not have been much different from what has actually happened, so maybe treat it as though it were done the way you would have advised and make the adjusting book entries accordingly.

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to Tim Vane
07th Dec 2018 07:25

Thanks, I am just worried about the lease being reported corrrectly on the financial statements. The lease is in the name of the director, not the company therefore I am reluctant to report it as an asset on the balance sheet (along with the lease finance as a liability of course).

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By SXGuy
07th Dec 2018 09:01

You have really answered your own question had you thought about it.

If the company is paying for something on behalf of someone else, then logically there is a liability.

So if the director owed the company money where do you expect you would see this on the balance sheet?

Furthermore how do you purpose the double entry would show if the Compant paid a director expense?

When you know the answers you will know how it's to be treated.

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