Hello,
I am new to the forum and to accounting for more complicated transactions (so far, I have been recording mainly simple sales and purchases). I am about to record my first HP agreement for machinery my employer - a small business owner - purchased recently, and I would be grateful for your advice. My intended journal looks like this:
Dr Tangible asset a
Dr VAT b
Cr bank (deposit paid) c
Cr HP liability a + b – c
Is it correct? In addition, the HP document lists acceptance fee and option to purchase fee, stating they are included in instalments. I am not sure how to account for these two fees.
Thank you in advance for your help!
Replies (3)
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Is it correct? - yes
"In addition, the HP document lists acceptance fee and option to purchase fee, stating they are included in instalments. I am not sure how to account for these two fees."
These would normally be entered at time of payment so the final fee would not show up till it is paid at the end
Dr finance costs
Dr vat (if applicable - normally only vat on one of two)
cr bank
Note it may be that the fees are mixed in with the hp payments in this case it would be
dr hp
cr bank
with full payment
then dr fees (and vat if applicable)
cr hp
on date of payment