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Accounting entry

swati (article) (33 Points)

13 December 2011

If a Company has purchased a Car for Employee for Rs. 4,00,000/- and financed it through Bank Loan of Rs, 3,50,000/- and paid cash of Rs. 50,000/-.

But the entitlement of Employee towards the Car was for Rs. 3,00,000/- so the employee paid Rs. 25,000/- in cash and got Rs. 75,000/- financed as loan which would be repaid in 4 years. Car would be transferred in the name of the employee after 4 years for an amount of Rs. 5,000/-

So please tell me the accounting entries to be passed by the Company for the same.

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3 Replies

CMA Shilpa Shinde (COST ACCOUNTANT) (217 Points)
Replied 13 December 2011

Though the Second part of your query not clear (put clear detail)

Reply For,

1 ) Car Purchased by company against loan a/c entry :

Motor Car A/c - Dr - Rs.400000/-

To X (Motor Car Co) - Rs.400000/-

2) X (Motor Car Co) - Rs.400000/-

To Y (Loan Finance Co.) -Rs.350000/-

To Cash -Rs.50000/-

As and when Company start paying EMI to Y(Loan Finance co) entry :-

Y Finance Co.- Rs.XXXXXX

To Bank - Rs.XXXXXX.

Clarify Second Part.

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 13 December 2011

Motor Car Dr 400000

Employee Cr 100000(400000-300000)

Cash Cr 50000

Loan Cr 250000

No each year depreciation will be provided on the car by the company. Now at the end of the 4^th year, the car would be transferred to the employee for Rs.5000. So the WDV of the car as at the end of the 4^th year would be arrived & the entries accordingly for the Profit/Loss on transfer of the car to the employee in the books of the company would be made.