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What is the jnl to dispose of an asset with o/s HP

I really need someone to point out the obvious for me.

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I have inherited our sister companies accounts and a number of aged items have not been processed, one of which is writing off an asset.

It's been a longtime since I have had to dispose of an asset and I have complete brain fog on the journal and transactions that I need to post. Can anyone point me in the right direction? Below is what is currently in the ledger.

0050 Vehicle purchased for                  £14,165.00 

0051 Depreciation to date of sale       £6912.52

2310 HP for vehicle o/s                         £5770.88

         HP interest o/s                              £855.12

4200 Sales invoice for                          £11,100.00 incl. VAT   (Posted to customer’s account)

4200 Bank Receipt for                         £4657.46 incl. VAT  (This has not been cashed against the sales invoice) - This is meant to be Sales invoice less o/s HP, the math seems to be out there by £183.46 which leads me to believe the HP interest has been incorrectly calculated by the former book keeper).

I have input a journal for the following:

 

N/C Name Details T/C Debit Credit
0050 Motor Vehicle Disposal T9   14,165
4200 Sales of Assets Disposal T9 14,165
N/C Name Details T/C Debit Credit
0051 Motor Vehicle Depreciation Disposal T9 6,912.52  
4200 Sales of Assets Disposal T9   6,912.52

 

 

Can anyone point me in the right direction, of how to process the sales invoice and money received to clear the outstanding HP balance?

Replies (11)

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By JazzySasha
29th Jun 2022 15:51

I think your first step is to find out how the previous bookkeeper posted the original purchase via HP as you appear to be correct that the maths is out. There should be only one credit balance for HP and no second credit balance for HP Interest.

Just a thought - Are you sure there isn't a debit balance on an account called "HP Interest Suspense" lurking around somewhere?

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Replying to JazzySasha:
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By PYE223
30th Jun 2022 09:45

Hi,

Sorry, I think I poorly explained my issue. Currently in the ledger is:

2310 HP for vehicle o/s £5770.88
4200 Sales invoice for £11,100.00 incl. VAT (Posted to customer’s account)
4200 Bank Receipt for £4657.46 incl. VAT (This has not been cashed against the sales invoice)

The balance refers to o/s HP interest which hasn't yet been posted to the ledger.

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By Paul Crowley
30th Jun 2022 10:14

If I was the external accountant, I would prefer that you left it to me at the year end
Otherwise I would be looking to rework it and logic check
Quicker for me to do it than check other people's workings, as I would have the full TB and know what was done last year

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Replying to Paul Crowley:
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By tom123
30th Jun 2022 10:34

I see your point, Paul, but if the OP is in house, and the organisation is a reasonable size, they will be wanting to get this stuff sorted month to month.

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Replying to Paul Crowley:
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By tom123
30th Jun 2022 10:34

dup

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Replying to tom123:
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By Paul Crowley
30th Jun 2022 11:28

We spend quite a bit of time dealing with bookkeeper journals that are just not correct.
And by that I mean independant bookkeepers selling services to client
It gets worse when the in house person does this stuff as the in house person does not come acreoss the oddities quite so often as dealing with just the one client

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Old fat furry cat-puss
By bagpuss1968
01st Jul 2022 15:15

Presumably the Credit side of the sales invoice has been posted to your asset disposal code 4200 (£9,250) and Output VAT (£1,850), leaving you with a profit on disposal of the vehicle of £1,997.52?

Next step is to clear down the liability side of things? Post the cash receipt to the sales ledger account and then clear the balance left by Debiting the HP liability code (2310) and crediting the sales ledger account with £6,442.54.

This then leaves £671.66 as a debit on 2310 which needs to be journaled out to the P&L, either as interest, early exit fees/penalty charges/loss on disposal etc. - the final statement/purchase documentation from the lease company should be able to confirm the nature of the costs that you are left with here.

The 'outstanding interest' amount of £855.12 is a bit of a red herring and can be ignored imo as it isn't part of the double entry system - it was probably (mis?)-calculated on a sum of the digit basis, which almost always won't tie in exactly when an asset is disposed of before a related finance agreement has reached maturity.

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Replying to bagpuss1968:
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By Bobbo
01st Jul 2022 15:33

bagpuss1968 wrote:

and then clear the balance left by Debiting the HP liability code (2310) and crediting the sales ledger account with £6,442.54.

Do make sure this 'crediting the sales ledger account' actually goes against the specific customer the sales invoice went to, rather than purely being a journal to the control account or you'll be forever left with a difference!

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Replying to Bobbo:
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By PYE223
04th Jul 2022 09:39

Well noted, thank you!

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Replying to bagpuss1968:
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By PYE223
04th Jul 2022 09:39

Thanks Bagpuss1968! This is exactly what I needed!

Its nice to start the week on a good note!

Many thanks!

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Old fat furry cat-puss
By bagpuss1968
04th Jul 2022 09:57

As Bobbo states, the £6,442.54 credit needs to be posted to the individual Sales Ledger account to which your £11,100 sales invoice was posted to. This would normally require a bank/cash receipt. If your accounting software doesn't allow you to make a Sales Ledger posting such that the debit side goes directly to your HP liability code, it should at least allow you to post something like a bad debt write off (would need to be without VAT), after which you can journal it to the correct code(s) in your Nominal ledger.

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