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Bookkeeping - How to enter Asset Purchase accounting journal entries
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Published on Thursday, 11 January 2024 11:18
A Client emailed asking how to enter the asset purchase accounting journal entries – Our Company just bought 2 cars –
- Holden Cruze for $16,700.00 includes GST/stamp duty/transfer fee
- Barina for $12,888.00
We traded in the old company car – Holden Commodore for $3000 and the wife’s car for $1500.
We have not claimed the $1500 but gave it to the business, as a contribution.
Now both ’new’ cars belong to the company.
The $4,500 total trade in (both cars) was netted out of the purchase of the Barina so the invoice is -
($12,888- $4,500) $8,388.00 net cost.
We have in our accounts currently:-
MV @ cost 18539.37
MV accu dep’n 15412.00
Please advise the entries. Thank you.
Solution to set up & record – 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 (motor vehicle) accounts 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 Insurance if included in the deal) from the $16,700 (or you can leave for accountant at year end to pick up).
NA Asset MV Accum Dep 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, if the software allows, or before, in the Chart of Accounts)
How to enter Asset Purchase accounting journal entries:
*Is the Loan a Chattel Mortgage? – You can mention type of loan in account name as well as the Finance Company name.
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 they need 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?
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