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.
We received a government grant to purchase a new vehicle. We are paying 25% to the dealership and the DOT is paying the remaining balance directly to the dealership. How do I enter this? I want the full value of the vehicle to show on the balance sheet but not on the profit and loss.
Thank you, this helped me so much! I wasn’t sure how to set it up with having a loan etc.
This was the simplest instruction I have ever run across! Thank you!
This is very helpful. In addition, how do I record a vehicle purchase with a trade. Example: Truck purchased for $40,000.00 with a truck traded in for $10,000.00.
How would I record the purchase without touching my bank account? I am setting up a new set of books starting 1/1/21, and the vehicle was purchased in Dec prior to entering the opening bank balance.
When creating the journal entry, I need clarification on the following;
We put an 8K cash down payment plus a 1K check down payment. How are those number included? Do I enter the total financed amount or total sale price?
Total sale price is 41,514.24
Down payment 8,000.00 cash plus 1,000.00 check plus 3,000.00 Manufacturers Rebate
Amount financed 24,883.01
Total payments 29,514.24
When writing the check for the loan payment what do I put the account under? The long term liability or fixed asset? I know this is probably a dumb question but this is my 1st loan I am setting up! Thank you for your help!
When you make the payments you will have to split the payment between the long term liability this will show the loan being paid down and the interest paid as that is a separate expense. So if your paying is $500 with $400 going to principle and $100 going to Interest you will split the payment like this:
4/11/2021 Toyota
Car Loan Liability $400
Interest Paid Expense $100
Hope that helps!
This has been very helpful!
I’m having a harder time understanding the asset account side of it. I have a few questions still.
1. Does the down payment on the vehicle not impact the liability account, but goes directly to the fixed asset account?
2a.For every single loan payment (monthly), should there also be a journal entry that adds value to the asset account?
2b. The fixed asset account doesn’t have the full value of the vehicle up front, but grows with every loan payment, correct?
I hope this makes sense. Thanks again for posting!
How do I set up new vehicle purchase (Corp. purchase at $40,000 + HST with no financing) in my Capital Cost Allowance schedule in Quickbooks? I understand the CCA limit for class 10.1 assets is $30,000 plus HST. I am just not sure what happens to the other $10,000 or where to record the difference as the Fixed Asset amount and opening CCA amount will differ by the $10,000 plus HST?
This leads to my second question – how to fill out the Details by Class (S8Class) on my T2 return? I did claim the $5,200.00 ITC (HST on $40,000) on my HST return.
Thank you so much, your article has been a world of help.
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Thank you for the explanation. This issue I run into is that the company often purchases vehicle financed over 72 months but they often pay them off in 24 months. On the Bill of Sale it lists the total cost of the vehicle if payments are made each month for the 72 months. If I list that amount as the total cost under Fixed Assets and Liabilities but the company pays the vehicle off early, how do I adjust for the savings in interest by not carrying the loan the full 72 months?
You should be able to reconcile the loan account to the ending statement so it zero’s out.
Can you please provide me with a video?