In order to set up this transaction you will need the following information (usually found on the finance agreement).
1. Full value of new fixed asset and VAT.
2. Trade in value of old fixed asset and VAT.
3. Administration (set up) fee and VAT.
4. Total amount borrowed from finance company.
In this example we are buying a New Holland TM120 for £32,000 trading in an old Ford 7710 for £15,000 with a set up fee of £400 and borrowing £17470 on hire purchase.
Set up a new nominal in the liabilities Group for the Hire Purchase of the new asset with a VAT code of O - outside scope.
Enter a Bank Payment with the cheque amount for the initial payment.
1. Line 1.Set up new asset coded to the Tractor nominal in the Fixed Asset Group
2. Line 2. Trade in of old asset again this is coded to the tractor nominal in the Fixed Asset Group.
3. Line 3. Enter the administration fee coded to Misc. Expenses or HP Charges nominal in the General Expenses Group.
4. Line 4. Enter the total amount borrowed (as a negative) coded to the new nominal set up for hire purchase payments on this asset as described above (2025 in our example).
5. The transaction should now be in balance. The first repayment can now be set up as a Bank Payment coded to the new hire purchase nominal (2025 in our example). To be totally accurate the Capital element and Interest element of the repayment should be split and coded to the relevant nominals.
The above Bank payment can now be set up as a Standing Order to cover future payments.