I am trying to set up a purchase of a vehicle for my business and I'm stuck. I have set up an asset account for the vehicle and an a/p account for the vehicle payable and have posted the total purchase. I have a personal vehicle that is not part of the business but I used it as a trade in and received $1000 credit. I was thinking it would be a debit to Capital Contribution but I need the debit to reduce a/p account. What is the correct procedure?:eek:

I've tried to write this 3 times now, but I'm finding questions because I'm not quite sure how you originally recorded it. It's sounding like you recorded the payable for too much since you're wanting to reduce it. If that's the case, then you're either out of balance in your entry or you've made up for that somewhere else that it perhaps doesn't belong.

Let's say the vehicle was $35,000, you gave your personal car as trade in for $1000, you paid $5000 down and that leaves $29,000 for the payable. (Use notes payable, not accounts payable.) A questionable part of this is if you're intentions are to say the $1000 you put in of your own car is to be treated as an investment from you as an owner. That's what it sounds like, so I'm going to go with that. This entry would be:

Dr. Vehicle 35,000
Cr. Cash 5,000
Cr. Notes Payable 29,000
Cr. Capital 1000

You got the vehicle for 34,000, but it's like you invested another 1000 to add to that. It also sounds like the confusion might be in the fact that you'd credit capital, not debit it.

See if you can fit that in with your own numbers. If I've interpreted your intentions incorrectly, or if you don't know how to fix your original entry, then please post that information. You can use my sample numbers if you don't want to say the real ones.