You may decide that you want to purchase an asset on credit. There can be advantages for your cash flow especially if you can secure a low or interest free deal.
In this example we use the purchase of a laptop for £2,500 including VAT over 10 months interest free. It is important to record the purchase of an asset in your company records correctly, especially if you are using the flat rate scheme for VAT.
Flat Rate Scheme for VAT
Normally the flat rate scheme prevents you from reclaiming VAT on your expenses and purchases however, if the purchase is for a capital asset that costs over £2,000 including VAT you can reclaim the VAT. inniAccounts will take care of this automatically for you and you will see the claim on your next VAT calculation.
Setting up your asset purchase
The first step is to contact your account manager to ask for a loan account to be set up for your asset purchase. Once it has been created you can then record the purchase.
In the Bookkeeping area, select your loan account.
- Click the Enter new transaction button then select the Asset purchase option from the drop down menu.
- Enter the details of the asset purchase that you will effectively be making, i.e. for the full cost that you will incur for the purchase, in this example it would be £2,500 with VAT at 20%.
- Save the transaction ensuring the match checkbox has been selected.
You will now see the asset listed and the balance of the loan account as being -£2,500.
Each time you make a payment from your business bank account you will need to record the transaction as a deduction against this loan.
In this example a payment is made each month for £250 including VAT.
- When the payment appears on your business bank account, in the Bookkeeping area select the Business bank account.
- Select the Enter new transaction button, followed by Transfer to another account from the drop down menu.
- Enter the details of the payment made as per your business bank statement, i.e. amount, date, tick the matched button and select the PC purchase account in the pull down list. Press save.
- Check the outgoing payment is shown in your Business bank account transactions and your business bank balance matches inniAccounts.
- Change the account to your loan account that lists the asset purchase .
- You’ll see the payment you just entered listed in the loan account. Click the payment and press edit.
- Click the matched check box and save. The balance will be updated to show the remaining balance due for the purchase.
You simply repeat this each time you make a payment until the balance has been cleared.