Purchase of Motor Vehicle

When purchasing a motor vehicle, often we made a down payment (deposit) and arrange the balances with a car loan. Assuming you purchase a motor vehicle at S$80,000.00 (S$85,600.00 with GST) and you paid S$10,000.00 as a down payment and take a loan for the remaining amount.

Use the Purchase Invoice transaction to record the bill received from the “Car Company” for the vehicle purchased.

The double entry for this transaction will be:

Debit Vehicle (Fixed Asset account type): 80,000.00

Debit GST Paid (Input Tax): 5,600.00

Credit Accounts Payable: 85,600.00

Next, Use a reverse Purchase Invoice to transfer the amount owed to the “Car Company” to the loan account. The double entry will be:

Debit Accounts Payable: 75,600.00

Credit Loan (Current Liability type of account): 75,600.00

Then, use a Payment transaction to pay the outstanding amount (the down payment) of 10,000.00 and knock off the reverse purchase invoice of 75,600.00 at the same time.

The double entry for this transaction will be:

Debit Accounts Payable: 10,000.00

Credit Bank: 10,000.00