Hire Purchase payments

[Angelic]

Our company is buying a car for a director on hire purchase, how do I record the interest part and capital part of the payment.

Thank you in advance

 

[Daugela]

I would say just read and apply FRS105 or FRS102 (depending on the soils of your company) assuming you’re a small business based in the UK and not part of the group or financial services firm.

 

[Angelic]

I would say just read and apply FRS105 or FRS102 (depending on the soils of your company) assuming you’re a small business based in the UK and not part of the group or financial services firm.

Thank you but not sure how that helps

 

[Daugela]

Ok, for instance here more details if applying FRS102https://www.aatcomment.org.uk/frs-102-and-hire-purchase-agreements/

 

[Angelic]

Thanks, I'll ask somewhere else

 

[Scalloway]

The journals in the page quoted are what you need to use

Dr Asset
Cr Loan
Cr Bank with the deposit paid.

You can either debit all HP payments to the loan account and do an annual calculation for the interest as in the example, or you can work out the interest on each payment and split them as they are paid.