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Hire Purchase accounting treatment?

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Hi,

 

Can anyone help me with the accounting treatment for a hire purchase of a van?

 

Do you…

Dr fixed asset with the total cost and Cr Hire Purchase Liability with total cost

 

Dr Depreciation charge in P&L Cr Depreciation 

 

And then for every payment instalment do you Cr bank and Dr Hire purchase Liability?

 

How do I treat the interest? and when it comes to the tax, would I use AIA for the total amount of the fixed asset as though it had been paid for all at once in cash?

 

Thanks 

Replies (6)

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By David Ex
23rd May 2022 21:25

You said a couple of weeks ago that you were setting up a partnership. Can your partner not help?

If you are offering tax and accounting services for reward, you should subscribe to relevant reference works.

If in doubt, use Google:

https://www.google.co.uk/search?q=Hire+Purchase+accounting+site:www.acco...

Thanks (2)
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By DKB-Sheffield
23rd May 2022 22:18

Slightly concerned you need to ask to be honest?

Interest... part of HP payment so in line with loan amortisation.

AIA... depends. If it's a company - probably. If it's S/T or partnership, may not be worthwhile (it depends).

If it's a company, be sure to follow the relevant sections of FRS102/105 - both in terms of the loan liability AND assets held under finance leases. As a clue, additional disclosure may also be required under one of those standards.

I realise I've not 'answered' the question but, it may give you a starter for 10.

Thanks (3)
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By Leywood
23rd May 2022 22:29

This is pretty basic stuff.

Don’t the AAT state that you should not be undertaking work that you are not proficient to undertake?

It might help if you can actually be bothered engaging with folk when they do provide answers to your questions. Not a thanks I’m site, never mind a comment in response to your previous two questions. People’s goodwill is finite.

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Replying to Leywood:
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By DKB-Sheffield
23rd May 2022 23:16

Good point, well made.

I've just noted that 11 days ago the OP was awaiting a practice licence. Either AAT extremely efficient, or the OP perhaps shouldn't be doing anything just yet? Just a thought?

Oh... I've thanked you OBO the OP.

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Replying to DKB-Sheffield:
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By RM85
23rd May 2022 23:48

Hi!

Just to confirm, I’m no longer starting my own practice as I’ve decided to get a bit more experience. Thank you for your responses though…and for boosting my confidence…! Lol

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RLI
By lionofludesch
24th May 2022 00:07

[sigh]

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