How do I enter a Hire Purchase agreement?

To enter and repay a loan for the purchase of a fixed asset, including any trade-ins and other administrative charges.

Elizabeth Ground avatar
Written by Elizabeth Ground
Updated over a week ago

Firstly, set up a new category for the liability.

  1. Click on the + symbol at the top right:

  2. Select New Category

  3. Enter the name and details for the new HP liability – select Category type to be Liability:

  4. Save Category.

    Set up a category for the new asset being purchased if required.

  5. Repeat steps 1 & 2 above

  6. Enter the name of the fixed asset, ensuring the category type is Asset:

  7. You may choose to have a separate category for each individual asset, or group assets of a certain type together against a general category such as “Plant & Machinery”.

  8. Save Category.

    (If not entering an invoice post as Money out using the same method of splitting out the entry over more than one line).

  9. Click on the + symbol at the top right:

  10. Select New Supplier Invoice

  11. Enter the date, supplier account and invoice number, then select the orange split entry symbol to the right:

  12. On the top line enter the purchase of the full value of the fixed asset including VAT. This should be posted to the new asset code set up in step 6.

  13. If there was a trade in enter this as a negative figure against the relevant asset category

  14. Click on the + symbol to add another line.

  15. Enter the amount of money borrowed from the finance company as a negative figure (this should not include any interest or finance charges). This should be posted to the new liability code set up in Step 3:

  16. If applicable, enter the admin fee. This should be posted to an expense category:

  17. The total balance shown at the bottom of the entry should equal the deposit paid:

  18. Click on Save.

  19. Go to bank entries and find the payment (for manual bank accounts enter manually).

  20. Make sure the payment type is Supplier Payment and under Category select the supplier.

  21. Ensure the correct invoice is selected and Confirm or Save.

Entering the HP loan repayments

  1. Go to bank entries and find the HP loan repayment (for manual bank accounts enter manually).

  2. Make sure the payment type is Money Out and click on the orange split entry symbol:

  3. Enter the HP loan element included in the repayment (total amount borrowed/no. of repayments) and post to the HP liability code e.g.

  4. On the next line, if applicable, enter the interest element of the repayment (total interest charges/no. of repayments) and post to an expense code such as “HP interest”:

  5. Ensure the total is the same as the bank payment and Save.

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