My client has recently bought a van outright. Rather than take it on credit through the dealership they have borrowed money from a family member.
The van is shown on Sage and is paid off in full but how do we show the money owed to family member? This is to be paid back monthly but without interest.
I told the client that the family member should be set up as a supplier/creditor and when the monthly payments are made they should be recorded on Sage accordingly until the balance is paid off in full.
The money for the van is totally divorced from that borrowed from the relative.
Simply recognise as :
Dr Bank Cr relative liability
then as payments are made
Cr Bank Dr relative liability
the van is totally seperate to the loan that enabled its purchase (a bit like a bank loan used to purchase a car as opposed to HP),
kind regards,
Shaun.
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Shaun
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The van has been recorded on the supplier account it was bought from and shown as paid in full. It will be depreciated now every year.
I will get the client to set up her relative as a supplier and each time a payment is made it will reduce the debt.
The client thought it was ok to show it being paid to the dealership but I said hold back till i get it confirmed by one of you guys. My thoughts were right for once!
Might be a terminology problem, but I would consider a loan for a vehicle differently from money due to a trade supplier.
The loan to the relative would be shown on the Balance Sheet as a long-term liability (apart from repayments due within a year), whereas a trade creditors would be a current liability. Therefore you might want to designate the account as a loan rather than a supplier.
