Not sure if this is within the scope of the forum but I am about to change my company vehicle, a slightly complicated but not unusual procedure and want to make sure I enter all the transactions correctly in my Solar accounts.

Current vehicle is shown as an asset at £3600 inc VAT which is the part exchange allowance from the dealer and I will use this pus the recovered VAT on he new vehicle as the total deposit.

New vehicle total cost is £21156 of which the VAT element is £3481

I have paid an initial deposit of £500 from the cheque account and would bear the remaining £2981 deposit cost on the credit card until the VAT element is recovered after the end of the current period (Feb).

The remaining balance of £14000 will be an ongoing monthly finance agreement.

Grateful for any advice on how to enter these transactions initially to recover the VAT, show the new asset and account for the monthly payments.

Hi John,

Can you please give me a little information about the purchase:

1. The total vehicle price is £21,156 with VAT of £3481, so the ex-VAT price must be £17,675. But £3481 is less than 20% of £17,675. Why is this?

2. You said the remaining balance is £14,000, but by my calculation the remainder should be £21,156 - £3,481 - £3600 = £14,075. Is that correct?

3. What are your monthly payments and over how many months will make these payments?

Thanks

Hi Mark

Thanks for your reply. You are right as I only forwarded approximate figures previously

Total price of £21,156 includes a non VAT element (registration and licence) of £270

Remaining balance of £14,075 is correct.

Monthly payments will be £461 per month over 36 months

Incidentally, my query is no reflection on Solar Accounts itself which I find to be great, comprehensive yet easy to use software for people like me.

Kind Regards

Hi John,

OK - Recording all the details in Solar Accounts is a little tricky.

Here's what you need to do initially:

1. Go to the Accounts list and double-click on 'Motor Vehicles' then set the opening balance to £3,600. (This is the ex-VAT value of the old vehicle)

2. Create a new liability account called 'Hire Purchase Liability' - this will represent the money you owe on the new vehicle.

3. Create a Money Paid Out transaction from the Hire Purchase Liability account to the Motor Vehicles account for £20,886 with VAT at 20%. The Type should be 'General Payment' and the VAT Treatment should be 'Purchase of Goods or Services from UK Supplier'. This transaction represents the purchase of the new vehicle.

4. Create a Money Paid Out transaction from the Hire Purchase Liability account to the Motor Expenses account for £270 with VAT at 0%. The Type should be 'General Payment' and the VAT Treatment should be 'Out of Scope'. This represents the registration and licence costs.

5. Create a Money Received transaction from the Motor Vehicles account to the Hire Purchase Liability account for £3,600 with VAT at 20%. The Type should be 'General Payment' and the VAT Treatment should be 'Sale of Goods or Services to UK Customer'. This transaction represents the sale of the old vehicle.

6. Record a General Transaction from the 'Cheque Account' to the 'Hire Purchase Liability' account for £500. This is your cash deposit

7. Record a General Transaction fromt the Mastercard (or Visa) account to the 'Hire Purchase Liability' account for £2981. This represents your deposit paid by credit card. This should leave the balance of the Hire Purchase Liability account at £14,075.

Then each month you pay £461 which includes £70.03 interest. You should record two transactions each month:

1. A Money Paid Out transaction from the Cheque Account to the Hire Purchase Liability account for £390.97. Set the VAT rate to 0% and the VAT Treatment to 'Out of Scope'. This records paying off some of the loan principal.

2. A Money Paid Out transaction from the Cheque Account to the Interest Charges expense account for £70.03. Set the VAT rate to 0% and the VAT Treatment to 'Purchase of Goods or Services from UK Supplier'. This records payment of the interest.

Note: when recording the final monthly payment the amounts in 1 and 2 above should be £391.05 and £69.95 to account for rounding.

I hope that makes sense. Note that a similar method is described here:
http://www.solaraccounts.co.uk/forum/topic.php?TopicId=777&Posts=1

Regards

Hi Mark

Thank you so very much. That is customer service par excellence.

Kind Regards