Accounting - Purchasing A Truck

 

 

 This article is meant to help you with the entries that are necessary when you purchase a new or used truck. It explains the accounting principles behind what you need to do and gives you an overview of doing this manually in the Truckers Helper.

 

ACCOUNTING PRINCIPLES:

When you purchase a truck you create an ASSET, the truck itself, and a LIABILITY, the loan for the truck. The only things associated with the purchase which are EXPENSES are any taxes, licenses, etc. The down payment on the truck is NOT AN EXPENSE, it is applied againt the liability.

 

Here's an example:

 

TRUCK PRICE = $100,000

SALES TAX = $ 6,000

LICENSE = $ 1,500

TOTAL COST = $107,500

DOWN PAYMENT = -$ 20,000

LOAN AMOUNT = $ 87,500

 

This goes into your books as:

 

ASSET = $100,000 the initial cost of the truck

LIABILITY = $ 87,500 the loan amount

EXPENSE = $ 7,500 tax & license

 

PROGRAM ENTRY:

To enter your truck in the progam you will first add the truck to the program and create the liability and asset accounts.

 

1. Go to Truck Maintenance, click ADD TRUCK and complete the Q&A to add the truck.

2. Click TRUCK INFO, to access the Truck Information screen. Fill out the truck information including the PURCHASE PRICE and loan information. Click SAVE & EXIT. NOTE: If this is a truck you already had and are now adding to the program enter the BOOK VALUE of the truck as the Purchase Price.

3. The program will ask if you want to create a Liability Account. Answer YES to create the Liability and Asset accounts for this truck automatically. NOTE: if you got a loan from the bank for more than the value of the truck do not use this process to create the Liability, see #2 below.

 

 

 

ADJUSTMENTS:

 

Once you have the Asset and Liability accounts created you will need to enter the other items that affect this transaction. How this is done will depend on how your DOWN PAYMENT was handled.

 

1. CASH DOWN PAYMENT: Show this as a PAYMENT on the Liability from the account you took the cash from. This is done as a single entry in the Income & Expense section.

 

TYPE = LIABILITY

AMOUNT = Amount you Paid Down (do not include taxes, etc.)

PAID BY = The type of account you paid this from (CHECK, CASH, etc)

PAYMENT ACCOUNT = The account you paid this from.

CHARGE TO ACCOUNT = The name of the Liability Account.

 

2. LOAN FROM A BANK: if you got a loan from the bank for the cost of the truck, taxes, fees, etc. then setup the liability using a single entry as shown below. You will then make individual entries to pay for the Asset, taxes, fees, etc. to cover the purchase.

 

TYPE = LIABILITY

AMOUNT = Amount you received from the bank.

PAID BY = N/A

PAYMENT ACCOUNT = The account you deposited the loan into.

CHARGE TO ACCOUNT = The name of the Liability Account.

 

2. TRADE IN: if you trade in your old truck you will need to TRANSFER the value from your old trucks ASSET account and apply it against the LIABILITY ACCOUNT for the new truck. In The Truckers Helper you cannot directly transfer money from an ASSET to a LIABILITY, so this is done as 2 separate transactions.

 

1. Click QUICK ENTRY/ASSET/SALE - the Sale of Asset box will appear.

2. Select the Asset Account for the FROM account.

3. Select the CASH account for the TO account

4. Enter the date, amount of your trade in value, etc.

 

NOTE: this simplified transaction is based on receiving the same amount as a trade in as you have the asset on your books for. If you received MORE for your trade in than you had the in your asset account you will need to transfer the difference FROM CAPITAL GAINS TO the ASSET ACCOUNT. If you received LESS than your asset you will need to transfer the difference FROM THE ASSET ACCOUNT TO THE CAPITAL GAINS ACCOUNT.

 

The program will create entries for the Sale of the asset and deposit the amount you received as TRADE IN in your CASH account. Next you need to show this as a PAYMENT from your CASH account against the LIABILITY. This is done as a single entry on the Income & Expense page.

 

TYPE = LIABILITY

AMOUNT = Amount of your trade in value.

PAID BY = CASH

PAYMENT ACCOUNT = CASH

CHARGE TO ACCOUNT = the LIABILITY account

 

EXPENSES:

 

The expenses associated with this transaction are any taxes and licenses which you paid at the time of the purchase. These are entered as EXPENSES in the normal manner and charged to the appropriate Expense Account.

 

REPORTS

 

Profit & Loss Report - payments made on the principal of a liability are not an EXPENSE and are not shown on the Profit & Loss report. You expense for the truck is taken as a deduction for DEPRECIATION against the ASSET. The INTEREST you pay is an EXPENSE and will be shown on your Profit &Loss Report.

 

BALANCE SHEET - the Balance Sheet will reflect payments which have been made on LIABILITIES and will reduce the amount of the LIABILITY by the amount of the payments made on the PRINCIPAL BALANCE. The ASSET will also be reduced whenever a DEPRECIATION deduction is taken.