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We purchased a new car from a dealership. We made a deposit to the dealer and got financing through them. Therefore the bank paid directly to the dealership. How do I enter the loan on my books? I have set up a loan account, just wondering what entry is opposite it when we didn't actually receive the money in our bank account and pay the dealer.
Hi there Lorna! The opposite side of the transaction is to increase the vehicle asset account: I'll explain 2 options:
1. Through the transaction screen:
Withdrawal for the amount of the deposit to the dealer (say $5,000 credit)
C+ capital asset addition for the actual cost of the vehicle (say $50,000 debit)
L+ loan addition for the actual amount of the loan (math works out to $45,000 credit)
2. Through the general journal screen:
Vehicle asset account debit $45,000
Bank loan credit account $45,000 (will need to set up a new account for the loan)
- note in option 2, you'd need to post the deposit to the dealer separately in the transaction screen of;
withdrawal $5,000
C+ asset addition vehicles $5,000
otherwise your asset will be out that amount.
Hope that helps!