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Business Tax Tip – Motor Vehicle Asset Accounting – How to set up in the books

images/Business Tax Tips.PNGClient emailed

Our Company has bought 2 cars  –

- Holden Cruze $16,700.00 includes GST/stamp duty/transfer fee          

- Barina $12,888.00

We traded in the company car – Holden Commodore for $3000 and the wife’s car for $1500.

Daniel has not claimed the $1500 but gave it to the business.

Now both ’new’ cars belong to the company.

Invoice for Holden Cruze is $16,700.00

The $4,500 trade in was netted out of the purchase of the Barina so the invoice is ($12,888- $4,500) $8,388.00 net.

We have in our accounts:-

MV @ cost                          18539.37

MV accum Depn                  15412.00

Please advise. Thank you.

How to Enter –

In order to keep things simple, we need to set up some new accounts (“NA”) for each motor vehicle, and new accounts for the loans on each car - it is then easiest to leave the final reconciliation and adjustments to your accountant year end.

I assume the 2 MV accounts mentioned above are only for the Commodore and no other cars. It is good practice to create new accounts for EACH vehicle so the accountant can reconcile at year end with ease!

Separate the Rego (and Insur if included in the deal) from the $16,700 (or you can leave for accountant at year end to pick up)

NA      Asset    MV AccumDep Cruze (to be used at year-end) - create in the Accounts List

Start a new General Journal with Purchase ticked at the top, and tick Includes GST.

Then enter as follows – (create new accounts as you go)

images/Capture2.JPG

 

 

 

 

 

 

 

*Is the Loan a Chattel Mortgage? – Can mention type of loan in account name as well

Monthly payments – for simplicity, allocate from bank to NA Liability MVeh Loan Fin Co Name (the new finance account).

The old car accounts – Asset MVehicle @ Cost Commodore, and the MV Accum Dep can be left for the accountant to calculate and adjust at year end, in case there are other adjustments he needs to do.

For other examples of entering MV assets in the accounts, see -

Quickbooks – How to go about setting Chattel Mortgage up and accounting for the monthly payments in Quickbooks

Another Asset Example – How to enter assets in the books

How do I show liabilities for the total borrowed including interest, not just the principle/asset amount?

Need help? Not sure? Call for FREE 30min advice / strategy session today! 0407 361 596 Aust

Call and you also get FREE “Avoid these GST mistakes” – There’s 18 that the Tax Office see regularly – Get them right!

Email This email address is being protected from spambots. You need JavaScript enabled to view it. or call 0407 361 596 Australia

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