A client purchased a van for his business afew weeks before he started trading. He is paying for the van monthly and his mum is also paying for part of the van. The mum pays her part into the business bank account and then the actual van repayment goes out to the finance company via direct debit. Do I code both the mums in and van out in Sage to 0050 for van or set up another code somewhere or would even the mums money in be classed as capital introduced?
The Mother is not loaning money to the business. She is loaning money to your client who is using it as capital for the business so it should be capital introduced by the client. It is not a loan from the Mother who in reality I assume has nothing to do with the business beyond funding it.
As a value added service keep a seperate note for your client of the Mothers investment (yer right, like we parents expect to ever see our money again!).
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Sorry, don't use Sage (originally banned it from my practice because of their licensing but now I've decided that I just don't like it). My responses to Sage questions are based purely on what the software needs to do. I'll leave nominal codes to the Sage software bods out there.
Repayments must be divided between Capital and interest with capital reducing the loan and interest being an expense of the business.
The money from the mother is recorded as Capital introduced rather than being linked directly to the loan repayments.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
In my opinion the cost of the van(not including any finance costs) should be entered by a journal of DR code 0050 with cost of van and CR Hire purchase (2310 or create new code in that area) then all bank payments should be debited against the hire purchase code with the capital amount and the amount of interest to Nominal code 7904. The deposit would be debited to Hire purchase code as well. I hope this makes sense as this is my first post, if anyone disagrees with this please feel free to respond.
Can I ask you a quick question - Are you registered for VAT?
If so, if you registered for VAT and the van is being purchased by hire purchase then you can claim back the VAT on the van purchase in the next VAT Return.
If you are registered for VAT, I would post the original purchase invoice through the purchase ledger to account 0050 (Motor Vehicles). Make sure the VAT is claimed. I would then set off the deposit against the purchase ledger balance.
Next I would do a purchase ledger credit note to transfer the financed amount to Hire Purchase (Code 2310). Make sure the tax code is T9. The balance on the purchase ledger account should now be zero!
I assuming that the contributions being made by the client's mother will be repaid. I would set up a loan account for this loan around 2301 to 2309. Then enter receipts via bank receipts as per normal.
The monthly hp repayments should be made as a bank payment to code 2310.
Finally, you would need to do a nominal ledger journal for the allocated hp interest each month. The journal would be:-
