Before you start:
1. If you use the Asset Register, firstly make sure you set up the new asset through 'Setup' / 'Asset Register': Click on 'New' to create a record card. You do not need to enter any purchase price or date.
If you do not use the Asset Register, set up an appropriate code within 'Setup' / 'Heading Codes' under 'Fixed Assets'.
2. Also within 'Setup' / 'Heading Codes', make sure that you have a code set up for the Hire Purchase Agreement, in either Current or Long Term Liabilities (dependent on the terms of the loan).
If you have an existing hire purchase agreement you may already have a suitable 'Group' set up. If so, we recommend that you set up your new hire purchase code up within the same group. Give the code a name that will refer it back to the asset to avoid confusion.
Entering the HP:
There are several ways to enter a Hire Purchase Agreement. If you are paying a deposit at the time of purchase the simplest way is to enter a Cash Analysis Payment:
- Enter a new Cash Analysis Payment.
- Choose the machinery dealer as the 'Supplier'
- Complete the top as normal with the 'Amount' being the deposit that you have paid.
- The first line of the transaction should be allocated to the new asset code with it's full value and VAT.
- The second line of the transaction can be used to record any trade-in. Enter this as a minus figure against the trade-in asset (which will give you output VAT).
- You can then enter any admin or finance charges as overhead expenses on separate lines.
- You will have an amount in the 'Amount Left' box. This should be the balance payable to the Finance Company.
- Enter the balance payable as the final line of this transaction, allocated to the liability code that you set up. Enter the figure as a minus figure.
- Once the transaction balances (i.e. the 'Total' at the bottom equals the 'Amount' at the top), click on 'Save'.
Your assets:
If you use the Asset Register you will be asked if you wish to write off the asset that you are trading in. If you say 'Yes' to this, it will enter a disposal date in the Asset Record Card and set the Current Book Value to zero.
The Record Card for the new asset will have been updated with purchase date and price details.
Your Finance Agreement:
The balance payable on finance now appears on the Balance Sheet and when you make your repayments, make sure you allocate it to the Liability code in order to reduce the balance accordingly.
If your repayments are part capital and part interest, when entering the payment remember to split it into two lines - one against the liability and one to an overhead expenses code for interest.
For more help on Business Manager call our Adviceline team on 01594 545022 or email us at support@farmplan.co.uk.
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