My customer pays an amount by Direct debit for a hire purchase agreement each month, just setting him up on Quickbooks, does this go on as a current Liability account as he owes the amount?
I haven't got the total amount of the loan as it was long before my time and is due to fininsh in the next 6 months. When I put it down as a payment out of the bank acocunt, I do 'pay loan company (which I have down under purchase ledger) and put it to Hire purchase account which at the moment I have set up as current Liabilities just checking this is correct.
This would usually go on as a long-term liability and you would probably need his Hire Purchase Agreement to know the actual figures to enter.
Without going into VAT (if a commercial vehicle & VAT registered)... the capita amount would be entered as a credit in the Hire Purchase account, and debit the Motor Vehicle asset.
Each month you'd increase the Hire Purchase account by the interest, against an interest expense account... and the payment would also then go against the Hire Purchase account - reducing the liability, and each month the interest expense would also reduce.
To do this, you'd probably have a Hire Purchase schedule and workings - from the figures in the original Hire Purchase Agreement.
Many thanks for the info, I kind of understand it, it was a van so there would have been VAT involved somewhere, he finishes soon but the original set of accounts for it was done for a few years on excel by someone else who just entered it as an amount for HP non vatable.
I will have to ask for the loan agreement, and go from there, I am doing his VAT quarter if I don't get the infomation in time can I leave the amount of this VAT quarter and enter it for next, as the previous lady didn't have any VAT attached to it at all.
Like I said the VAT may have been dealt with prior to my time. Any help will be much appreciated.
If it's from some years ago, it may be unlikely there is anything to be done with the VAT - you will just have to hold off until you get more information, and confirm for sure what had been done.
I'm actually now just a little confused. You say you have the loan company showing on the purchase ledger, but also a Hire Purchase Account?
Sounds like you may have double accounted for this.
