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Post Info TOPIC: Hire purchase interest


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Hire purchase interest


Can anyone advise how I enter hire purchase interest into Sage? 

Fiona



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Senior Member

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If you post the hire purchase bank payment to the hire purchase control account, you can then post the interest as a journal:

DR Hire purchase interest (7904)

CR Hire purchase control (2310)

Another way would be to split the hire purchase repayment and post this as two bank payments on Sage, taking one to hire purchase interest and one to the control account.



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Pearce & Co - Chartered Accountant and Chartered Tax Adviser 

www.pearceandcoaccountants.co.uk

These comments are outline only and are not a substitute for specific professional advice.



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Thanks for your help Robert, thats much clearer now.



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Veteran Member

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Hello,

I have a very similar question. the company just bought a car and is paying by instalments. I went through the documents and there is nothing mentioned about hire purchase. For the first month i just simply made a bank payment on sage using nominal code 0050 - motor vehicles. Just wondering if it is ok, or maybe i should ask directors if it was hire purchase and make adjustments?

Thank you


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Senior Member

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You'll have to check with the directors and double-check the documentation to confirm the nature of the arrangement.

If this is a hire purchase agreement or a finance lease, then the car should be shown as a fixed asset on Sage, whilst the associated hire purchase or finance lease creditor should also be recognised on Sage.   

If this is an operating lease, then the instalments should be posted to a profit and loss code, not the 0050 code.



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Pearce & Co - Chartered Accountant and Chartered Tax Adviser 

www.pearceandcoaccountants.co.uk

These comments are outline only and are not a substitute for specific professional advice.



Veteran Member

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Thank you Robert,

I am sure that it is not an operating lease as the company will own the car after a certain period of time I just did not know that journals adjustment had to be made for hire purchase. Is the entry on sage different if it is hire purchase or finance lease? And what about deposit paid? As i entered into sage it in the same way and it is been reconciled already so I cannot change it. But on the other hand there was no interest rate included in the deposit so maybe I can leave that payment under 0050, but adjust the rest of installments? For instance, I scale down the payment: the amount for an interest I post to P&L and the amount paid for the car I post into 0050?

Many thanks

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Expert

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Hi Ginta

No difference between HP and finance lease postings on SAGE.

Basically you would capitalise both and recognise a liability.

The important thing to work out is what is the cost of the asset and what are the total payments over the period.  The cost will be capitalised with an equal liability being recognised.  The liability will be reduced each month by the capital amount of the payment with the difference being expensed as the interest charge.  Different ways to allocate the interest payments over the period of the loan but easiest way is straight line.

Regards

Mark



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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.



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Many thanks for your replies.

Kindest regards

Ginta

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