Subtitles of the Movie

In our previous movie, we talked about how to enter an asset into our New Asset Listing. In this movie, I'd like to take it a step further and show you how we'll record a purchase that is partially a down payment and partially a loan. Please keep in mind that there are a number of ways that you can do this. I'm simply showing one method that I have found to be the least confusing. First, when we purchase an asset, I'd like to have it recorded in my Item List. So I'm going to the Fixed Asset Item List, go down to the Item on the bottom and select New. This asset will be a new car. So I'll call it New Car. My Asset Account will be Vehicles, so I'll select the Vehicles Account from the Fixed Asset on the Balance Sheet. My description should give me further information about my purchase. Then I'll go down to the Date of the Purchase and also the Cost of the Purchase. We'll say it cost us 35,000 dollars. Now, this is the information that is mandatory on the screen. The remaining fields are options; however, I strongly recommend that you fill them in. It's always best to put as much detail as possible in when putting your assets into your accounting system. Let's go ahead and say OK, Spell Check comes up and that's ok. I'm going to close out. My asset is now part of my list. Let's continue with the purchase. I'll close out of my Asset List, go into a Check and I'm ready to begin. I'm required to give my bank a 5,000 dollar deposit and that's what I'm writing the check for. You will notice on the expense side I have selected my Loan Account and my Asset Account. But here's where the trick comes in. We're going to use both tabs. First lets start with the Items Tab. When I select the Item and go past my Inventory, you will notice all of the Asset Accounts. Here I'm going to choose the Fixed Asset for the new car. If I had paid a hundred percent cash, I would simply put the total under Amount, Save and Close and my job is done. However, I didn't. I only paid 5,000 dollars cash. That means I have 30,000 dollars for the cost of this asset that still needs to be booked. Here's where the expenses come in. I am going to take the expense, record my loan and record the remainder of the asset against it. Now, remember. Liabilities are negative, so I'll put in a negative 30,000 dollars and then a positive 30,000 dollars for the recording of the asset. This is because I am not writing this check out for 35,000 dollars. Again, if I was writing the check in full, I would simply go to Items and complete it in one screen. To make it easier on myself, I'm choosing to record the loan and the remainder of the asset purchase right in the same check. Let's go to the Journal and see what happens. You'll notice that I must select my transaction first. This is telling me that I must Save this screen. I'm going to change this date to ensure that it's our last transaction and simply say Save and New. When I do, and I go Previous, now I can go back in and actually see my transaction. My transaction is not completed until you hit Save. So before I could actually read the Journal, it was important to Save the transaction. On our Journal, we see all the detail from the check. Let's close up our Item Description and our Item Column and concentrate on the Journal. Here you'll notice that the Checking Account had a credit for the check of 5,000 dollars. My Loan had a credit of 30,000 dollars to record the liability. The Asset Account totals 35,000 dollars as a result of the offsetting entries for the check and the loan. I chose to use one check to do the entire transaction. Now, if you wanted to, we could have just done a check for the cash payment and then gone back and done a journal entry for the loan itself. I simply find that it's easier to do the entire transaction with utilizing a check. Once we record the check and we go back to our Balance Sheet, we will now see that in our Vehicle Asset Account, our loan has been recorded. We'll change the date to reflect the 23 so our asset will show and we will also see that our loan is now recorded in our Vehicle Section.