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How to record loan payments for a fixed asset

Created on  | Last modified on 

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. Select 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 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.