Rhianrach wrote:

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We have purchase a new vehicle and I could do with knowing the best way to go with regards to the bookkeeping.

The old vehicle has been part ex for £3500. We have paid a £500 deposit and the rest (£18000) is on finance.

I can leave the accountant to dispose of the old vehicle and would assume he will post the £3500 to vehicle assets.

I have posted the £500 deposit to vehicle assets.

I just need to know how to deal with the finance. Would it be setup as a bank account?

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 The journals I would make are:-

Dr Motor Vehicles Accumulated Depreciation (for the vehicle disposed of) xxx

Dr Profit/Loss On disposal of fixed assets                                               xxx

Cr Motor Vehicles Cost On Disposal (for the vehicle disposed of)                       xxx

Being vehicle disposed of

Dr Hire Purchase Creditor          3,500.00

Cr Profit/Loss on disposal of fixed assets  3,500.00

Being part exchange value of old vehicle

Dr Hire Purchase Creditor          500.00

Cr Bank                                                   500.00

Being cash deposit on purchase of new vehicle

Dr Motor Vehicles Additions, at Cost  22,000.00

Cr Hire Purchase Creditor                                 22,000.00

Being purchase of new vehicle on hp agreement

Let me explain you the treatment of the new vehicle. 

As the new vehicle costs £22,000 and it is on finance lease, this creates an contingent asset as well as an liability. 

Treatment of New Vehicle is 

                                       DR                     CR

Motor Vehicle                22,000

Long term liabilities                                   22,000

(H.P Creditor)      

Advance paid of £500 should go towards this H.P Creditor account.  So credit bank and debit H.P. Creditor 

Coming to the sale of purchase. 

You first need to calculate the profit or loss on the sale of current vehicle, and any profit or loss should be recognised in the PNL. 

I think if you are not well aware of the treatment of disposals, leave this to your accountant and let them do that. From the asset disposal, you can transfer £3,500 to H.P Creditor.