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When you purchase a new vehicle, you get the fun of riding around in a new car with the new car smell! Our job has just begun – to get your new asset recorded properly on your books.
Sales Contract The first thing we’ll ask you for is the sales contract. It will give us the payment price of your car, and we’ll use that number to record your new asset on your balance sheet. Then we’ll decide on a depreciation method and book depreciation monthly or at year-end. |
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Trade-In
If you traded in a vehicle that is on your books, we’ll need to make an adjustment to your books. Effectively, your old car will be eliminated from your balance sheet. If this asset had a book value and it was not fully depreciated, the net value would be compared to the trade-in value and a gain or loss on the asset sale would be recorded on your income statement. We’d also start the depreciation for the new car.
New Car Loan
Most often, a new car purchase will be financed, so we have a new liability to record too. We’ll need to get a copy of the loan documents from you and an amortization schedule of the payments. Then, each time you make a monthly payment, the amount will need to be split between principal and interest and those amounts will need to change each month.
There are a lot of other numbers on a car purchase: taxes, licenses, warranties, add-ons, fees, and more. Some of these can be directly expensed, while others need to be included in the value of the asset.
Let us know if you purchase an asset this summer so we can get it booked right for you.
If you traded in a vehicle that is on your books, we’ll need to make an adjustment to your books. Effectively, your old car will be eliminated from your balance sheet. If this asset had a book value and it was not fully depreciated, the net value would be compared to the trade-in value and a gain or loss on the asset sale would be recorded on your income statement. We’d also start the depreciation for the new car.
New Car Loan
Most often, a new car purchase will be financed, so we have a new liability to record too. We’ll need to get a copy of the loan documents from you and an amortization schedule of the payments. Then, each time you make a monthly payment, the amount will need to be split between principal and interest and those amounts will need to change each month.
There are a lot of other numbers on a car purchase: taxes, licenses, warranties, add-ons, fees, and more. Some of these can be directly expensed, while others need to be included in the value of the asset.
Let us know if you purchase an asset this summer so we can get it booked right for you.
The information presented is of a general nature and should not be acted upon without further details and/or professional guidance. For assistance in identifying and utilizing all the tax deductions to which you are entitled, please contact us, your CPA or tax preparer.
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