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How should I post Purchases and Sales of vehicles

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  • How should I post Purchases and Sales of vehicles

    When I purchase a vehicle, I write a check to pay for it and enter it into Inventory acct., but when I sell it, I'm not sure how to post the transaction.
    Also, would it be better for me to use bill pay?

  • #2
    Debit to Cash and credit to Inventory for the amount you paid for the item. The balancing account in gain or loss on transaction. In other words, when you sell something from inventory, there are three options: gain on sale, loss on sale and neither gain nor loss on sale. The latter probably would not be entered. You probably also need to indicate amount of sales tax payable. Ask you accountant for guidance.
    Lorin Browning, Ph. D.
    Fellow -- National Tax Practice Institute

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    • #3
      It sounds like you work for a dealership. If so, do you use a PO system for your purchases? If you are selling something out of inventory, it is best done via an invoice, even if it is a cash sale. If it is a "company vehicle" you are purchasing and selling, it should probably be recorded as an asset rather than an inventory item. It would be good to check with your accountant to see how he/she wants the transactions recorded.

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      • #4
        Yes, I use a PO to purchase and an invoice to sell. I just wasn't sure if I had to enter the sale as a Cost of goods or debit inventory and credit bank.
        I have Inventory as Other Asset and I have "Inventory Reduction" in Cost of goods. Iuse Bill Pay for my entries and change the check number later to ACH.
        Should I be entering the sale to Cost of goods?

        Also, How do I post a consignment vehicle.
        Last edited by Tony Bones; 06-22-2020, 06:32 PM.

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        • #5
          If you look in your Cost of Goods Sold account detail (from the P&L), you should be able to see the transaction there. Using an invoice for the sale should automatically handle the cost of goods sold as it pulls the item out of inventory.

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