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How to record loan payments for a fixed asset

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Summary

How to record a loan‑financed fixed asset purchase in Sage Accounting. This includes journal entries, trade‑ins, and monthly repayment processing.

Resolution

When you buy a fixed asset and finance it with a loan or installment plan, you must record it in your accounts. Record the original purchase by posting a journal. Include any deposits and fees at the same time as the purchase. To track how much you have left to pay, record your monthly repayments and any interest charged.

Create required ledger accounts

  1. Click Settings, then Business settings.
  2. Under Financial Settings, click Chart of Accounts.
  3. Click New Ledger Account.
  4. Use these recommended accounts:
    Name Account number Category
    Loan or Installment Plan 2300 Chequing, Liability
    Licenses 7301 Expenses
    Equipment lease and rental* 7302 Expenses
    Installment plan interest 7901 Expenses
    *Use this only for a car lease. The category determines where the accounts display on reports.
  5. Select Save.

▼Record a loan without a trade-in

Example:

A car costs $20,000 with a total purchase cost of $20,475.
Fees: registration $250, title $100, emissions testing $75, documentation $50.
Deposit: $1,000.

  1. Go to Adjustments, Journals.
  2. Click New Journal.
  3. Enter the journal date, reference, and description.
  4. Enter the following lines:
    Ledger Account * Details Debit Credit
    Property and Equipment (1500) The net value of the new asset 20,000.00 0.00
    Sales Tax Payable (2310) Tax on the new vehicle 2,000.00 0.00
    Licenses (7301) Registration, title, testing, and documentation fees for new vehicle 475.00 0.00
    Checking (1010) Bank deposit paid 0.00 1,000.00
    Loan or Installment Plan (2300) Total purchase price less the deposit 0.00 21,475.00
  5. Select Save.

▼Record a loan with a trade-in

Example:
Old vehicle: cost $15,000, accumulated depreciation $5,000
New vehicle: $25,000 including tax
Trade‑in value: $7,500
Additional fees: $250 registration, $100 title, $75 emissions testing, $50 documentation
Deposit: $2,000

Step 1: Record the disposal of the old asset

  1. Go to Adjustments, Journals, and click New Journal.
  2. Enter the date and a reference for the journal. Enter a description if needed.
  3. Enter the relevant information to record the disposal of the old asset and clear your depreciation, for example:
Ledger Account * Details Debit Credit
Property and Equipment (1500) Disposal of old asset 0.00 7,500.00
Other Income (4300) Disposal of old asset 6,000.00 0.00
Accum. Depreciation - Prop&Eqt (1900) Disposal of old asset 5,000.00 0.00
Other Income (4300) Disposal of old asset 0.00 5,000.00

Step 2: Record the new purchase and loan adjustment

Ledger Account * Details Debit Credit
Property and Equipment (1500) Net value of new asset 25,000.00 0.00 Select this check box
Sales Tax Payable (2310) Tax on new vehicle 2000.00 0.00 Select this check box
Licences (7301) Registration, title, testing, and documentation fees for new vehicle 475.00 0.00
Checking (1020) Bank deposit paid 0.00 2000.00
Other Income (4300) Part exchange value 0.00 5000.00
Loan or Installment Plan(2300) Total purchase price less the deposit and part exchange 0.00 20475.00

▼Record monthly installment payments

Example:

Monthly payment: $300
Principal: $250
Interest: $50
  1. Go to Banking and click the applicable bank account.
  2. On the New Entry menu, click Expense/Payment.
  3. On the Other Payment tab, ensure you select the correct bank.
  4. Enter the repayment date and reference.
  5. Enter the total payment amount.
  6. Add lines:
    Ledger Account Details Total
    Loan or Installment Plan(2300) Loan or Installment Plan repayment 250.00
    Installment plan interest (7901) Loan or Installment Plan interest charged 50.00
  7. Click Save.

To save time, set the first payment as a recurring entry.