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Post Info TOPIC: HP Interest Journal Help
kizzyfur22


Newbie

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HP Interest Journal Help
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Hi all,

I need a bit of help please with the interest journals for a HP agreement.

A client bought an asset for £236779.79 on HP + VAT £47355.96 = total to pay £284135.75

I know that I need to Dr Fixed Assets £236779.79, Dr Purchase tax control a/c £47355.96 and Cr HP Creditor a/c with £284135.75

Then the monthly repayment from the bank are Cr Bank, Dr HP Creditor a/c

However I'm not sure how to journal the interest payments because they're not equal repayments.

The 1st repayment is for £1000.00

The 2nd repayment 2 months later is for the full Vat amount of £47355.96

Then there's 72 monthly payments of £4772.00

Please can you advise how to work out the interest on these payments.

Thank You

 



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YLB-HO


Guru

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Does the HP agreement show the total interest due for the period?

Normally the total to pay includes the Interest over the length of the loan. There is a provision in tax to do the following at the outset of the loan:


Dr HP Interest £107804.20
Cr HP Loan £107804.20

This will make the loan £391939.96 - the same about of the payments over the length of the agreement.

If for any reason the loan is repaid early (rare and unlikely I would think), any interest that may not be due is shown as a interest rebate, and it then accounting as a credit at that point.

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Frauke
BKN Book-keeper of the year 2011
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