View Full Version : paid off auto loan
01-17-2006, 11:47 AM
we paid off a truck last year but my long tern liability account is still showing 11K owed. I must have set it up wrong. I opened it up with a 0 balance and the payments just added to the total owed. Shouldn't there be an initial entry of the money owed and then the balance decrease? Thanks in advance, Jeannie
You should have made a Journal Entry to Debit Vehicles (Fixed Asset type) for the purchase of the vehicle and CREDIT the Long Term Liability account for the amount financed.
THEN posted the payments to the liability account and the interest portion to Interest Expense as you made them.
01-17-2006, 11:57 AM
Yes, you need to look back at the point when the loan was set up. Hard for me to tell you what to do without seeing the purchase transactions and knowing the terms of the loan, but e.g. truck purchase price $50,000, deposit $15,000, loan $35,000, you need to have $50K in the asset account (debit) balanced by $15K from the bank or whatever (credit) and loan $35K (credit). See what you've got, and come back if you can't figure it out.
Your loan (liability) account ought now to be showing the total payments as a negative in the Balance Sheet - i.e. as though it's an asset. A liability which is actually an amount you owe would be a positive value under the liabilities section.
I'm garbling this evening, but I hope you understood that.
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