Need Help in Accounting Transaction
Dear brothers and sisters,
If i purchase a car through Bank payable Three years,
What will be the transaction if i pay it after 1 Month of loan a total amount in cash :
Assume :
Original Cost : 100,000.00
Interest 3 yr : 10,000.00
Total Cost : 110,000.00
Starting 1/1/2008 - 31/12/2010
Monthly Installment : 3,055.55
Firts month i made payment, but second month i sold the car for 120,000.00 what will be the transaction in order to close with Bank.
Thank you.
He is asking for the transaction not the loan outstanding figure.
I go with the calculation of fieryangel.
The bank has nothing to do with your loss or gain when you sold your car.
sorry ...forget to provide provision for 1 month depreciation..
Debit depreciation and credit car a/c
When you calculate profit on sale of asset take this in to consideration
Entries are
When you purchased the car
Car A/c debit 100000
car loan a/c cr 100000
for first loan instalment
debit car loan A/c
debit Interest on car loan(calculate interest amount)
credit Bank a/c 3055.55
When you sold the car
Debit Bank/Cash a/c 120000
credit Car A/c 110000
credit profit on sale of asset 10000
For the settlment of loan
Debit Carloan a/c (balance of the car loan after deuducting the principal portion from the first instalment)
Credit bank a/c
If bank charges any loan pre-close charges
debit that amount in bank charges and credit to bank a/c
I hope it will help you
First of All you will not be able to sell the car because the documents will be in the name of the Bank.
Anyhow for the entry it will be
DR Fixed Asset - 110,000/-
CR Bank Payable - 110,000/-
For the Sale it will be
DR Bank Payable - 106,944.45
CR Fixed Asset- 110,000/-
(less any depreciatin for 1 month)
DR Bank A/c 13,055.55
(Surplus Cash in Your
Account left after
settling the Loan)
CR Profit (Diff of Cash Recd and asset closed after deducting the depreciation amount for one month)
The bank has nothing to do with your transaction of selling the car whether you have gain or loss.
The amount due to the bank is only 97, 222.22 unless otherwise the bank will ask you to pay some charges due to pretermination of your loan contract with them.
Principal: 100,000/ 36 mos = 2,777.78
Interest : 10,000 / 36 mos = 277.77
................ ---------
Monthly amortization 3,055.55
Principal Amount 100,000
Add: Interest 1st mo. 277.77
................ ---------
Total ................ 100,277.77
Less: 1st mo payment .... 3,055.55
................ ---------
Loan balance............... 97,222.22