{"id":2256,"date":"2011-10-23T15:16:45","date_gmt":"2011-10-23T13:16:45","guid":{"rendered":"http:\/\/www.officetodo.com\/public\/?p=2256"},"modified":"2011-12-04T11:52:21","modified_gmt":"2011-12-04T09:52:21","slug":"basic-accounting-buying-a-car","status":"publish","type":"post","link":"http:\/\/www.officetodo.com\/public\/basic-accounting-buying-a-car\/","title":{"rendered":"Basic Accounting – Buying a Car"},"content":{"rendered":"

We have just bought our company a car. In this case we are going to assume that this car was paid in full right away and the useful life of it has been set to 5 years (60 months). Car purchase price was $12,000 and date it was bought, was March 1, 2011.<\/p>\n

Accounting Entries<\/strong><\/p>\n

The car is an asset to your company. We are going to add the car under Assets \u2013 Vehicles \u2013 Debit $12,000. Next we need to decrease Cash \u2013 Credit $12,000.<\/p>\n\n\n\n\n
\n<\/td>\n\nDebit\n<\/td>\n\nCredit\n<\/td>\n<\/tr>\n
\nVehicles\n<\/td>\n\n12000\n<\/td>\n\n<\/td>\n<\/tr>\n
\nCash\n<\/td>\n\n<\/td>\n\n12000\n<\/td>\n<\/tr>\n<\/table>\n

Now we have to calculate the depreciation for the car. The car will be depreciated for 60 months, so we will divide paid amount with months (60) \u2013 12,000\/60 = 200. This will be the amount that will be depreciated into expense every month for 5 years. The $200 will be added to Depreciation Expenses (Depreciation Expenses \u2013 Debit 200) and Accumulated Depreciation (Accumulated Depreciation \u2013 Credit 200). Adding the monthly depreciation to Accumulated Depreciation on your balance sheet decreases your Assets thus reflecting the value of the asset (over the periods it loses its value as its being used and gets older).
\n<\/p>\n\n\n\n\n
\n<\/td>\n\nDebit\n<\/td>\n\nCredit\n<\/td>\n<\/tr>\n
\nDepreciation Expenses\n<\/td>\n\n200\n<\/td>\n\n<\/td>\n<\/tr>\n
\nAccumulated Depreciation\n<\/td>\n\n<\/td>\n\n200\n<\/td>\n<\/tr>\n<\/table>\n

Reporting<\/strong><\/p>\n

Next we are going to add our car to the balance sheet. We move under Assets section and Property, plant and equipment (PPE). Remember that the balance sheet shows a snapshot of single moment. In our example balance sheet date is 31 December 2011. We bought the car on March 1, 2011 and hence by December 31, 2011 the car has been depreciated for 10 months ($200 x 10 months = $2,000 by 31 December 2011).
\nFirst we add the car at full value and subtract reporting periods depreciation, which means $12,000 \u2013 $2,000 = $10,000. Now we can add $10,000 under Assets \u2013 PPE.<\/p>\n

\"Assets<\/p>\n","protected":false},"excerpt":{"rendered":"

We have just bought our company a car. In this case we are going to assume that this car was paid in full right away and the useful life of it has been set to 5 years (60 months). Car purchase price was $12,000 and date it was bought, was March 1, 2011. Accounting Entries […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[25,35],"tags":[],"class_list":["post-2256","post","type-post","status-publish","format-standard","hentry","category-1-basic-accounting","category-1-7-basic-entries"],"aioseo_notices":[],"_links":{"self":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2256","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/comments?post=2256"}],"version-history":[{"count":36,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2256\/revisions"}],"predecessor-version":[{"id":2457,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/posts\/2256\/revisions\/2457"}],"wp:attachment":[{"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/media?parent=2256"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/categories?post=2256"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.officetodo.com\/public\/wp-json\/wp\/v2\/tags?post=2256"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}