New Car Finance Lease - Is this the correct way to Post?

Hi,

Just wondering....If a Company has taken out a new Loan for a car is this the Correct way to post:

DR: Fixed Asset Account with the Value of the Car
CR: Liability Account with the Value of the Car.

Just wondering then if the Car say was 40k and there was interest on it of 8k - where do I post the 8k interest, or do I post it at all and capture the interest as a charge to P&L everytime there is a payment made on the loan.?

Hope the post makes sense.

thanks,

ALEXALLI said:

Hi,

Just wondering....If a Company has taken out a new Loan for a car is this the Correct way to post:

DR: Fixed Asset Account with the Value of the Car
CR: Liability Account with the Value of the Car.

Click to expand...

Title says finance lease so on that basis:
Yes...so in your example
Dr Fixed asset 40K
Cr Lease liability 40K

Just wondering then if the Car say was 40k and there was interest on it of 8k - where do I post the 8k interest, or do I post it at all and capture the interest as a charge to P&L everytime there is a payment made on the loan.?

Click to expand...

Assuming a 36 month term, monthly repayments would be €1,333 (40+8/36) €1,111 being capital (40K/36) and €222 interest (8K/36)...so the monthly repayment would be posted as follows:

Dr Lease interest P&L 222
Dr Lease liability 1111
Cr Bank 1333