Mr. X is a self employed gardener, he wants to buy a car (mainly for private use), but can not afford it. One of his regular customers offers to buy a car for him, they agree that the car will be repaid by deducting certain amount of money from each invoice Mr. X will issue to that customer.
Shall the repayment of the car amount be treated as drawings?
If the car is going to remain the property of the sole trader, I would probably do as you have suggested (keeping the private loan out of the business accounts). I would invoice the customer in full for each invoice and allocate the customer part payment to the invoice, and the balance to Drawings. Depending on your software, you may have to do it by creating a bank account to make the payment from (I think Sage will only pay a customer account from a bank account). Then doing a journal monthly/ yearly between the Loan Bank a/c and Drawings
If the business is going to own the vehicle, then i would put the full value of the loan on the books, as a Loan a/c, and allocate payments from that. E.g DR Motor Vehicle CR Loan a/c to start with, then Cr Customer a/c Dr loan a/c as payments are made.
That's how I would probably do it but there are other ways
