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We purchased a car through Loan, what entry you will prepare?

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Question ajoutée par Syed Ibrahim , Accountant , Sendan International Company
Date de publication: 2016/03/29
Waseem Abbas
par Waseem Abbas , Finance Manager , Americana Group

First of All keep one thing in your mind that Vehicle is not qulifying asset for capitalization of interest / finance cost as per IAS Borrowing Cost. "A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale". So Keeping this in your mind.

First of all:

Dr. Non Current Asset

Dr. Bank Charges (if any)

Cr. Cash/Bank (if there is a down payment)

Cr. Non-current liability (principal loan amount)

Subsequetly, amortize over period of time charge interest expense (included in equal monthly instalment) directly to profit or loss and decrease loan liability by part of principal in equal monthly instalment.

Dr. Non Current liability

Dr. Interest Expense

Cr. Cash / Bank

PREPARE AMORTIZATION SCHEDULE USING REDUCING INTEREST RATE. 

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