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How to Series No 3 – How to Enter a Chattel Mortgage Asset Purchase & Loan

This is the third part in a series I’m calling “How-To”. The first part was about entering insurance bills and the second part was about how to enter a VicRoads registration bill. I will be using Xero to present the example, but don’t worry if you use another software, the basic rules will still apply. 

The third how-to is about how to enter a Chattel Mortgage asset and associated loan into your accounting software.

Step 1

Let’s say your business has purchased a new motor vehicle. The invoice from the vehicle dealer might look something like the below example. Grab your invoice now.

Step 2

The finance company loan schedule is also required. It may look something like the below example. Grab you loan schedule now.

Step 3

Create the following accounts in your software (check first because some may already exist):

  • Deposit Paid (Current Asset) – no tax code
  • Motor Vehicles at Cost (Non-Current Asset) – apply capital expense including GST tax code
  • Chattel Mortgage (Motor Vehicle) (Non-Current Liability) – no tax code
  • Chattel Mortgage Interest Charges (Expense) – no tax code
  • Chattel Mortgage Fees & Charges – tax code varies, could be Free or GST inclusive (check your documentation)
  • Motor Vehicle Registration (Expense) – apply GST Free tax code
  • Motor Vehicle Insurance (Expense) – apply GST inclusive tax code
  • Unexpired Term Interest (Non-Current Liability) – no tax code

Step 4

First enter a spend money transaction to record the payment of the deposit:

Step 5

Next, enter this journal to record the purchase of the new vehicle:

Step 6

When it comes time to make a repayment to the finance company, enter a spend money transaction like this:

Bonus Tip!

Sometimes it isn’t possible to obtain the loan repayment schedule for whatever reason. When this happens, you need to create your own. I use this amortisation calculator by Bret Whissel. It has served me well over the years. I hope you find it useful too.

Next week for part four of this How-To series, I will cover how to set up a Hire Purchase agreement in your accounts. Until then, happy bookkeeping!

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How to Series No 2 – How to Enter VicRoads Registration Bills

Last week, I started a bookkeeping resource series called “How To”. Each week I will share instructions with you about how to enter some common transactions. I will be using Xero to present the example, but don’t worry if you use another software, the basic rules will still apply. Last week I explained how to enter an insurance bill.

The second how-to is about how to enter a VicRoads registration expense/bill into your accounts.

Step 1

Grab your VicRoads bill and go to the part where it shows you the breakdown of charges. It may look something like this:

Step 2

Log into your software and go to the area where you enter bills.

Step 3

Enter the VicRoads as the supplier, the relevant dates and the reference number or name as below:

Step 4

Enter a line in the bill for each charge shown on the bill. The registration fee is GST-free, the TAC charge includes GST and the insurance duty is BAS Excluded. If you are entitled to claim 100% of motor vehicle costs in your business, then you can claim the full GST amount on the TAC charge. Time and time again, I see clients entering the full amount of the registration expense as GST-free. While they are partly right, they are also missing out on claiming the GST of the TAC charge. Also, relevant here is the choice of account for expense coding – you may like a general account such as this one “Motor Vehicle Expenses”, or you may like to split your costs out in a more detailed manner and have an account for each type of car expense, in this case, “Motor Vehicle Registration”. It just depends on how much detail you want to see in your profit and loss report.

Step 5

Check that the GST amount agrees with the VicRoads bill. In this case, it is $40.00.

Step 6

Approve the bill to ensure the expense is added to the accounts correctly.

Final words…

So that’s it for this week’s “how-to”. I hope you learned something new. One thing I’d like to add about VicRoads “bills” before I close off this blog, is that to obtain an actual bill, you do have to have an account with VicRoads. They used to send out the document in the mail, but not anymore – it’s all online, like everything these days. Here’s the link to VicRoads where you can make an account if you haven’t already done so.

Bonus Tip!

For any bookkeepers out there who know the pain of not ever receiving an actual VicRoads bill from clients (who probably don’t know how to get it – see notes above), which makes data entry nearly impossible, here is the link to the TAC registration rates for FY24. This document provides the breakdown of TAC and insurance duty fees based on postcode and vehicle type. An excellent resource that I am sure you will use time and time again. There is also an online calculator you can use on the VicRoads website that will provide the figures you need easily. Here is the link for the calculator. Either resource will get you the information you need. You’re welcome by the way!

Next week I will show you how to enter a chattel mortgage loan. Until then, have a happy week.

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How to Series No 1 – How to Enter an Insurance Bill

This week, I am starting a bookkeeping resource series called “How To” (not very original, I know!). Each week I will share instructions with you about how to enter some common transactions. I will be using Xero to present the example, but don’t worry if you use another software, the basic rules will still apply.

So here goes, the first how-to is about how to enter an insurance bill into your accounts the right way.

Step 1

Grab your insurance bill and go to the part where it shows you the breakdown of charges. It may look something like this:

Step 2

Enter a line in the bill for each charge shown on the bill. In this case, there is one for the premium and one for the stamp duty component. Select the insurance account you want to use – you may have one for business insurance and another for motor vehicle insurance etc. Notice that the premium figure is plus GST, whereas the stamp duty is BAS excluded. This is because stamp duty does not attract GST. It is very important to break up your insurance bill like this and to never enter a bill 100% inclusive of GST. Doing so will mean that you overclaim GST in your BAS.

Step 3

Check that the GST amount agrees with the insurance bill. In this case, it is $38.25 which is one cent less than our bill, hence the rounding line I have added to agree the total amount with the supplier’s bill.

Step 4

Approve the bill to ensure the expense is added to the accounts correctly.

Final Words…

So that’s it for this week’s “how-to”. I hope you learned something new. Please note that this insurance example is pretty basic. Some insurance bills have extra charges which may or may not include GST. The trick to getting these sorts of more complex bills entered correctly is to ensure the GST figure in the bill agrees with your software entry. If it doesn’t, you need to check each charge for its GST status i.e. some items will include GST and others may be GST-free or GST-exempt.

Next week I will show you how to enter motor vehicle registration bills. Until then, have a happy week.

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