Is anyone able to check my journal for me please? I want to be sure that I have entered this correctly, and on the journal I'm not sure how to post the 14,900
Thanks in advance for any help!!
Asset list price
74,500.00
VAT
14,900.00
Finance charge
8,300.00
Admin fee
95.00
97,795.00
Part- Exchange value (VAT 3,600)
21,600.00
The part exchange asset was bought for 21,600 NO VAT at the beginning of the year and no depreciation has been charged.
This is the journal I'd make - assuming my interpretation of the amounts is correct (because you have a couple of inconsistencies):
Nominal account
Dr
Cr
Plant and Machinery - Cost
74,500.00
Inputs VAT
14,900.00
Disposals (Net proceeds from PX)
18,000.00
Inputs VAT
3,600.00
Admin Fee
95.00
Creditors - Hire Purchase
67,895.00
Plant and Machinery - Cost
21,600.00
Disposals (NBV of disposed asset)
21,600.00
111,095.00
111,095.00
The first two lines deal with the net cost and VAT of the item purchased. The next two deal with the proceeds of the PX - a credit for the net amount, rather than the debit you used, and it should be a P&L item (whereas you seem to be debiting it to fixed assets). Note that the VAT amount should be £3,600 based on your description, not the £3,000 in your journal - and it should be a credit (it's owed TO Mr VAT man; or at least reducing the VAT reclaimable on the purchase - hence to inputs) not a debit.
Next up, the admin fee as before.
The hire purchase creditor is really an assumption on my part - you've shown it as £64,895 in your journal, but if it's the purchase price minus the PX price (both inc VAT) plus the admin fee, that makes £67,895.
Then there is dealing with the disposal of the asset that has been PX'd - credit the P&M cost with its cost value, and you say there's no depreciation, so the same amount can be debited to the disposals account on the P&L - which should now show a £3,600 debit balance - a £3,600 loss on the disposal.
I haven't provisioned for the interest as you have because I usually just deal with it along with the payments (either debiting the capital amount to the HP creditor, and the interest amount to HP interest on the P&L OR debiting the full amount to the HP creditor, then journalling the interest amount between the creditor and HP interest on the P&L). In fact, looking at your journal, that provision appears to be spurious anyway - there's nothing AFAICS on the credit side that incorporates it. (If you're going to do that, then shouldn't the HP creditor itself incorporate the provisioned amount?)
However, as I said: My journal is based on assumptions about your figures: For example, is the difference between yours and my HP creditor the result of a deposit payment? Double check the figures.
One golden rule: Write the journal out in a logical order - look at mine above; if you follow it through, I'm dealing with the new asset, then the proceeds from the PX of the old asset, leading to the HP creditor figure, and finishing with dealing with the cost of the disposed asset.
Edit: I initially put the VAT value of the PX as outputs, but while it's a disposal, a PX isn't really a sale, so I've changed it to inputs.
-- Edited by VinceH on Thursday 28th of January 2016 02:39:33 PM
__________________
Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
I think I may have left a few things out, this is what it says on the agreement. I am a little confused about how a profit or loss on the sale of an asset is posted to the P&L account from a journal. I've not dealt with a disposal before (only done it on exams)
Cost (ex vat)
74,500.00
vat
14,900.00
total
89,400.00
Less: cash deposit
11,300.00
Part exchnage (inv vat)
21,600.00
Total deposit
32,900.00
balance financed
56,500.00
Finance charge
8,300.00
Admin fee
95.00
balance payable
64,895.00
I'm not quite sure what you are saying about the HP interest - I open 2 accounts for the HP creditor - 1 for the loan capital and 1 for the interest reserve, when the payments come out I CR the bank and DR the loan capital then at the end of the year I CR the HP interest reserve and DR expenses HP interest with the amount of interest paid within the payments in the year.
-- Edited by rachel_mclean on Thursday 28th of January 2016 03:36:11 PM
