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Regarding recording a transaction of equipment financed by the dealership with a cash down payment, how specifically do I put that in correctly? What I did was as a withdrawal I added it as a capital asset (C+) then also as a withdrawal I put it as a loan (L+). But now I'm thinking that I was supposed to put one of those as a deposit?
Hi Angela! First I'm going to check some assumptions I have from reading your message.
1. A loan was taken out and deposited to your bank account as a lump sum
2. You then made the capital asset purchase as a withdrawal for the whole amount offset by a C+ line.
If that's the case then you did step number 2 correctly, but step 1 you will need to edit. For the loan there should be a deposit offset by an L+ line to record the loan lump sum being added into your bank account.
Just in case, and because we're heading into the weekend I'm going to run another scenario for you.
Let's say you had a cash down payment paid initially to lock in the purchase of the new asset, then you went to the bank and took out a loan, then went back to the dealership to complete the purchase. In that case, we're looking at three transactions that I'll walk you through.
1. The downpayment/deposit paid to the dealership would be entered as a Withdrawal and then you would need to offset that with an A+ line and choose your Prepaid Items account. That account will just hold on to the deposit for us for now. Let's say that was for $5000.00 so now we have $5000.00 moved out of the bank and sitting in our Prepaid Items account.
2. Loan obtained from bank should be entered as a deposit to the bank account and offset by an L+ line to record the new loan on the books. Let's say the loan was for $20,000.00 so now we have an additional $20,000.00 in our bank account and a loan on the balance sheet for the same amount.
3. Complete the capital asset purchase. Enter a final withdrawal to show the last bit of funds going from you to the dealership. Let's say all of that loan ($20,000.00), plus a bit of additional cash ($1500.00) was going in for the final payment. So we enter a withdrawal for the $21,500.00. Then for the first detail line we need to do an A- to pull the $5000.00 deposit out of that Prepaid Items Account. Finally for the C+ line to add the capital asset to the books, we'd have an amount of $26,500.00 to balance the transaction.
I hope all of that makes sense. If you run into trouble, we're on the phones from 7am to 6pm Monday through Friday (Saskatchewan Time) and you can call us at 1-800-667-7893