Hi, I wonder if anybody could help me. I don't know why but I don't get this...even though I did it several times in January.
This is a journal I have made for a van bought on HP, I know that it's not quite right BUT I can't figure out why.
Total cost of credit 8632.36
Cash price 6995.00
JRNL
DR
CR
FA: MV
6995.00
Creditors: HP
8632.36
Creditors: HP Interest Reserve
1319.36
Expenses: Finance admin
318.00
8632.36
8632.36
In the balance sheet this journal does not make sense and shows the creditor as 7313.00, I don't know how to show the interest of 1319.36 - I know it's not supposed to go into the expense account until it has been accrued on the payments - so basically I think I am asking where does it sit for now?
The creditor shows as £7313 because that *is* the net creditor (total amount of finance including the interest on the credit side, less the interest reserve) - which is £6995 + £318 (presumably either the first or last repayments will include the £318)
If you're doing it that way, then each month you'll transfer the interest charge out of the interest reserve account and into the P&L account for it - which will reduce the interest reserve - along with posting the capital element of any repayment to the HP creditor, to reduce the capital balance.
The result each month will be a net creditor equivalent to the capital amount still outstanding.
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
