Read a posting about payment of insurance in one lump sum and wanted to ask about the correct way to record payment by instalments.

My business has a credit agreement (for this financial year only) with an insurance premium finance company to pay the insurance premium for one of our vehicles, so this is a liability. This liability is paid off in monthly instalments at the end of the month with money earned from the business.

Thank you for any assistance you are able to offer.

Regards,
Colin

Hi Colin,

Create a new account called 'Insurance Premium Loan'. Then record a new Money Paid Out transaction from this account to the appropriate expense account, with the date set to when your finance company paid your insurance premium. Then each month record a repayment of the loan principal from the 'Cheque Account' to the 'Insurance Premium Loan' account.

If your finance company charges you interest record a second monthly transaction to account for this interest expense as described here:
http://www.solaraccounts.co.uk/help/how-to-record-bank-fees-or-interest-charges.php

Regards,

Hi,

I also have this agreement. We are insured by one company, but pay a premium finance company. The initial agreement was for 2 vehicles but my boss has amended cover 4 times to put more vehicles on it!!

I don't have a letter from the premium finance company stating when and how much they paid the insurance company. all I have is a statement for the monthly amounts and when they will be collected. I don't know if it is just me being simple, but I don't understand the above post about recording the money paid out.

I have set up the insurance premium account as a liability account but don't know where to go from there?

Thanks,

Emma

Hi Emma,

Does the insurance period match the period during which you make payments to the finance company? If so, I would simply record this as an insurance payment each month. Firstly create an expense account called 'Vehicle Insurance'. Then each month click menu File > New > Money Paid Out, and record a payment allocated to the insurance expense account.

Regards,