There are two parts to purchasing any vehicle. The first part is recording the asset and the second part is recording the liability (if there is a loan on the vehicle).
If there is no loan and the vehicle was purchased in cash then you can skip the second part.
A Fixed Asset is anything purchased for long-term use (usually anything that will last more than a year). This is usually equipment, machinery, land and cars.
To properly record purchased vehicle or any other fixed asset, follow the steps provided below:
I. Creating a Fixed Asset Account for Vehicles
- Go to Chart of Accounts
- Click on New
- Select Fixed Assets from the categories provided.
- Enter the name and description for the account
- Select the Detail Type
II. Adding the Purchased Vehicle
To record the purchase of the vehicle, simply record a purchase and link it to the Fixed Asset Account that you created by following the steps provided above.
III. Setting Up Liability Account
A purchase of a fixed asset may come with associated liabilities like loans and EMI payments. To properly record the entire transaction, the user must enter and track the liability. The liability account will be a Long Term Liability Account. To set up such an account, follow these steps:
- Go to the Chart of Accounts
- Select New.
- Click on Long Term Liability from the provided options and click on Next
- Enter the details for the account such as name
- Click on Save
At this point, you should leave Unpaid Balance field blank as we’ll be handling that later and note that we are still not yet done with “how to record a vehicle purchase in QuickBooks”. Here we need to pass the loan entry
To record the loan amount, follow the steps provided below:
- Click on the Create Button
- Select Journal Entry
- Click on the Account Dropdown options and Select Liability Account
- Enter the total amount for the loan on the Credit side
- Select the Asset Account that you want the loan amount to be linked with
- Enter loan amount again but this time on the Debit side
You should also record every payment made for the loan. This can be done by entering checks and linking them to the loan.
Let me know if you have any questions or would like a video to go with this in the comments.