Hi - my client who is a used car salesman, sold a vehicle and did a deal with a part-ex from the customer. The customer was given £4000 for the part-ex and also my client paid off the outstanding finance on the vehicle of just over £500. I'm just contemplating what to value the car at in the accounts - option 1 - £4000 and post the £500 to finance charges or option 2 - £4500. I haven't come across this scenario before so any thoughts would be welcome.
On mobile so don't know your name...If he's bought the car in at £4,000 then I would say that is the purchase price. If he then chooses to settle o/s finance then that is an expense, the same as if he bought the car in and re-conditioned it for sale, e.g. paint, tyres, valet etc.
missing bits of info - this should in fact be FULLY documented on the sales invoice (for it to be valid under the VAT margin scheme which I am assuming as a second hand dealer he is using).
Missing info - overall sales price. What the part exchange 'consideration' actually was and how much cash/other payment was made to the person buying the vehicle. EG could be consideration £4000, but the buyer only took away £3500 in cash as the other will be used to pay off the loan. Or £4500 consideration and £4000paid......you get the drift.
Not enough info - get the sales invoices showing the deal/any other contract papers and pin the staff to a wall to tell you how it was paid/how much (or just find the debit card receipty bits!)
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
missing bits of info - this should in fact be FULLY documented on the sales invoice (for it to be valid under the VAT margin scheme which I am assuming as a second hand dealer he is using).
Missing info - overall sales price. What the part exchange 'consideration' actually was and how much cash/other payment was made to the person buying the vehicle. EG could be consideration £4000, but the buyer only took away £3500 in cash as the other will be used to pay off the loan. Or £4500 consideration and £4000paid......you get the drift.
Not enough info - get the sales invoices showing the deal/any other contract papers and pin the staff to a wall to tell you how it was paid/how much (or just find the debit card receipty bits!)
I agree, more info required.
Dealer should have a Used Vehicle Purchase Invoice of some kind, or will show on the same invoice as the purchase of the customers new car.
Ideally:
Customers new car £10,000
Less: p/x £4,000
Less: settlement to finance co £500
Balance due from customer £6,500
the key here is actual price paid by the dealer for the car which is important for VAT margin scheme (if applicable) for when it is sold on.
As Joanne has indicated, there may be a lot more to this to consider.
