Journal Entry for purchase of vehicle

How do I record the principle and Interest for a vehicle purchase?

 pready Posts: 2,677, Reputation: 897 Ultra Member #2 Dec 7, 2007, 01:01 PM
If you purchased the vehicle with 100% financing, ie a note then the journal entry will be:
Debit vechile for the cost
Credit Note payable for the cost.

If you put a down payment on the vehicle then the journal entry is:
Debit vehicle for the cost
Credit cash for the amount paid
Credit the note payable for face amoun of the note.

When interest is paid you journalize the entry as follows
Debit interest expense
Credit cash

If you are doing adjusting entries for the financial statements then the journal entry is:
Debit Interest Expense
Credit Interest Payable

To compute the interest you use the following formula:
Interest = Principle(note) * Rate(APR) * Time/(360 or 365 or 12)

If you are computing the interest for days outstanding you use the days/360 or 365
If you are comlputing the interest for months then you use # of months/12

for example you purchase a vehicle with a \$20,000 note for for 1 year with an apr 12% dated Jan Jun 1.

The entry to record the purchase at Jun 1 is as follows:
Debit vehicle for 20,000
Credit Note Payable for 20,000

At end of year to compute the interest you have to figure the amount of interest due
20,000 * 12% *7/12 = Interest due
20,000 is Principle 12% is the APR 7/12 is months outdatnding
Interest due is \$1,400

The journal entry to record the interest due at the end of the year is as follows:
Debit Interest Expense for 1,400
Credit Interest Payable for 1,400

When the Interest is paid in Jun the following year the journal entry is as follows;
Debit interest Expens for 1,000 (5 more months outstanding loan)
Debit Interest payable for 1,400
Credit cash for 2,400
 shaunawilliams Posts: 1, Reputation: 10 Junior Member #3 Sep 11, 2011, 02:21 PM
I'm a little confused...

Vehicle purchase with loan, write a check for \$20,000 to car dealer
Debit Notes Payable for \$20,000
Credit Cash for \$20,000

To set up the asset,
Debit Vehicle PP&E fixed asset for \$20,000
Credit ? (what do I credit here)

Monthly payments
Debit Notes Payable \$500
Debit Interest Exp \$150
Credit cash \$650
 pready Posts: 2,677, Reputation: 897 Ultra Member #4 Sep 11, 2011, 06:42 PM
What is the total purchase price for your vehicle.

To record the purchase of the vehicle your first journal entry will be:
Debit: Vehicle for the total purchase price
Credit Notes Payable for the difference between the purchase price and the amount of Cash paid.
Credit Cash for \$20,000
 accdata56199 Posts: 1, Reputation: 1 New Member #5 Oct 14, 2012, 01:24 PM
when I buy a vehicle in Alberta the GST is added to the account

DR-Asset -Vehicle 20000.00
DR-GST Paid on Purchase 1000.00
CR-Notes Payable 21000.00

When my payment is taken out of the bank, I use my amortization table to figure out the interest.
DR - Interest
DR - Note
CR - Bank

Thats the way I record my vehicle loans
 RazaWaqar Posts: 1, Reputation: 1 New Member #6 Dec 11, 2012, 01:17 AM
if we buy a car in current month and pay next month waht should be the entry
 pready Posts: 2,677, Reputation: 897 Ultra Member #7 Dec 11, 2012, 10:04 AM
Debit Vehicle
Credit Accounts Payable or Notes Payable
 junaira Posts: 2, Reputation: 1 New Member #8 Apr 24, 2013, 11:45 PM
How about with my case? Car purchased on Installment

Unit Price = 48,500
Discount= 1,500
Down Payment= 9,400
Monthly Amortization= 1,786 in 24 months

Kindly set journal entries upon acquisition, How much would be the Cost of the Assets?

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