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Post Info TOPIC: HP Purchase / Interest entries...


Guru

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HP Purchase / Interest entries...


Hi guys.

 

My questions are based upon the entries for Hire Purchase(s)

 

If for example :

Mr X acquires an asset, principal is £10,000 Interest shall be 12% PA, repaid over 12 months.

What are the entries?

I figure....

 

Debit the asset account £10,000

Credit the HP company with £11200

THEN - Create a balance sheet HP suspense account with the £1200?

.......

Upon paying the first payment, entries to be..

Debit HP company £933.33 (one months principal £833.33, one months interest £100)

Credit Bank £933.33

 

Debit HP interest (P/L) £100

Credit HP suspense (B/S) £100

.....

 

Are these, or would these entries be correct?

 

Thanks

 



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Johnny  - Owner of an overly-active keyboard. 

A man who can read, yet doesn't, is in no way wiser than a man who can't.

 



Guru

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If  there were to be one months payment to become accrued, would both the HP company (£933.33) a/c, and the HP interest expense (£100) a/c need accruing? Or just the HP account?

 

Thanks

 

 



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Johnny  - Owner of an overly-active keyboard. 

A man who can read, yet doesn't, is in no way wiser than a man who can't.

 



Veteran Member

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Hi,

I work in engineering and we have a lot of new machinery on HP.
I hope the following makes sense

( I use sage so the 4 digit codes are my nominal accounts)

DBT 0020 Plant & Machinery 110100.00
DBT 2201 VAT - Purchase VAT Control Account 22020.00
CRD 2310 Hire Purchase 132120.00
132120.00 132120.00


Deposit of £80970.00 made
DBT 2310 Hire Purchase 80970.00
CRD 1210 Bank 80970.00
80970.00 80970.00


Account 2310 Has a balance of 51150.00
Interest for Hire Purchase Charges 3822.00
54972.00
Acceptance Fee 200.00
55172.00 Total Still to pay


36 monthly payments to be made -

DBT 2310 Hire Purchase 1420.83
DBT 7950 Hire Purchase Interest 106.17
CRD 1200 Bank 1527.00
1527.00 1527.00

Hope this makes sense.



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Em

 

MAAT, CIMA student, avoider of Tax as much as possible and going greyer by the day.



Guru

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Hi Emmiestar. Thanks for your reply. Can I assume then from your description that you do not hold the value of the interest payable as a liability in the balance sheet? As in a HP suspense account? I figure your HP company is shown in the BS as a liability net of interest. The PL will show the HP interest paid during a 12 month period. I can't see where the total interest figure is stored. Unless I'm missing something? Thanks

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Johnny  - Owner of an overly-active keyboard. 

A man who can read, yet doesn't, is in no way wiser than a man who can't.

 



Expert

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No dont show the interest as a liability.  As the interest isnt a liability only the capital is.  If you were to cancel the agreement then most agreements only require the capital to be repaid not the interest.   Though some agreements have an early exit fee which would obviously become a liability of the option to terminate early was taken.

So the interest is only recognized as it is paid each year in the P&L.



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Mark Stewart CA

http://stewartaccounting.co.uk/

Providing accounting, bookkeeping, payroll and tax services to small and medium sized businesses across Central Scotland and beyond.



Guru

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Oh, I see. Thank you for your clarification Mark.

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Johnny  - Owner of an overly-active keyboard. 

A man who can read, yet doesn't, is in no way wiser than a man who can't.

 



Veteran Member

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Hi
Apologies for not replying yesterday.
My answer would of been exactly as Mark said!



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Em

 

MAAT, CIMA student, avoider of Tax as much as possible and going greyer by the day.



Guru

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Thank you both. :)

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Johnny  - Owner of an overly-active keyboard. 

A man who can read, yet doesn't, is in no way wiser than a man who can't.

 



Newbie

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Hi There

I have just searched as I have the same question.  I can follow Emmiestars response - thank you!  but have a question - I also use sage

I had to send an invoice to our HP company - I have yet to post it, as not sure what to do with it here are the figures

We purchased a products for stock - paid for it - then got finance on it (HP) with a buy back £50 at the end of the 36 months. Finance Co wanted an invoice from us - total amount we paid for it from our supplier.

But on the Invoice less a deposit paid (even though we didnt pay a deposit on it to them, we had already paid for the goods) so invoice is for £9104.63 + vat (£1820.93) total £10,925.56

They paid us £8194.17 + HP Charges £1762.35 + doc fees £200 - Payable HP £10156.52- the supp invoice is already paid off as it was a bank transfer when it was ordered (loan followed weeks later), our Cust Inv is un posted at the moment £10,925.56 that the finance co wanted

I have changed the figures to ours following Emmiestars but still cant see what to do with the sales invoice (unposted at the moment) to the Finance co - Its not a sale, so dont want to put it into our sales ledger and the acceptance fee £200



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Karyn



Master Book-keeper

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Hi Kayrn
So hows about an intro before we start. We always ask newbies!

Usual stuff - what prof body do you belong to, do you work for yourself or in a practice/ firm, are you a bookkeeper or accountant, what qualifications, how long in role, where up to in your studies-what exams passed/with what body/in midst of doing, where based, what you did before this role? That sort of thing. Helps get to know you but also how best to pitch answers.

Also can you add your first name so that it appears under the signature bar on your posts? Saves everyone looking it up each time!! (Edit profile --->signatures)

Would also suggest you start a new post rather than dig one up that is so old, although feel free to 'link' to this one.

What do you mean by products for stock?

Have you drawn up T-accounts? Often focuses the mind.


__________________

Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Master Book-keeper

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Thanks for adding your first name. Can you do the other bits? I have another Q.



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Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Newbie

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Posts: 3
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Company is a Hire / Sales Company stock we buy to hire out goes into our stock code (5000 on sage)



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Karyn



Master Book-keeper

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Date:

Lost at Sea wrote:

Company is a Hire / Sales Company stock we buy to hire out goes into our stock code (5000 on sage)


 Thats wrong.

 

What is it that you hire out?

 

This really should be added to a new post as Ive already said.



__________________

Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Master Book-keeper

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Posts: 8039
Date:

Lost at Sea wrote:

Hi There

I have just searched as I have the same question.  I can follow Emmiestars response - thank you!  but have a question - I also use sage

I had to send an invoice to our HP company - I have yet to post it, as not sure what to do with it here are the figures

We purchased a products for stock - paid for it - then got finance on it (HP) with a buy back £50 at the end of the 36 months. Finance Co wanted an invoice from us - total amount we paid for it from our supplier.

But on the Invoice less a deposit paid (even though we didnt pay a deposit on it to them, we had already paid for the goods) so invoice is for £9104.63 + vat (£1820.93) total £10,925.56

They paid us £8194.17 + HP Charges £1762.35 + doc fees £200 - Payable HP £10156.52- the supp invoice is already paid off as it was a bank transfer when it was ordered (loan followed weeks later), our Cust Inv is un posted at the moment £10,925.56 that the finance co wanted

I have changed the figures to ours following Emmiestars but still cant see what to do with the sales invoice (unposted at the moment) to the Finance co - Its not a sale, so dont want to put it into our sales ledger and the acceptance fee £200


My other Q - why did the HP company ask you to send them a sales invoice?

Have they taken ownership of the asset in some legal form (other than via the documentation ie what security have they taken over the asset and has the asset been marked in some way?



__________________

Joanne  

Fallows Hall Ltd 

Winner - Bookkeeper of the Year 2015, 2016 and 2017

Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



Newbie

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Posts: 3
Date:

Hi There

We hire out drapes, video products to corp parties

The sales invoice is what I dont really get which is why I have not posted it as of yet - I dont believe it should go down as a sale as i would have to do a purchase invoice to contra it with? but I dont think it should be in our sales ledger

I have 3 of these to do, and another on its way so I want to get it right the first time.  I have never done HP before over, I have read so maybe too much and now, cant get my head around.

Thank you for your help



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Karyn



Master Book-keeper

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Date:

Hi Karyn

Welcome to the forum.  

Just a thought, but could it be that they are wanting to see the purchase invoice from the supplier to yourselves, rather than a sales invoice. 

As Joanne has requested, please could you start a new thread.

 



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.

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