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This information applies to MYOB AccountRight version 19. For later versions, see our help centre.
https://help.myob.com/wiki/x/TQec
ANSWER ID:9111
Hire purchase arrangements are a common feature of small business operations. However, it needs to be noted that there is more than one type of hire purchase arrangement, and this page provides an example of how one type might be setup in your MYOB software.
You should always check with the ATO or accounting advisor regarding the specifics of your hire purchase arrangment and use this page as a guide only.
Example
You purchase a conveyor belt on a hire purchase basis over a period of 3 years (36 months). The price of the conveyor belt is $11,000 ($10,000 plus $1,000 GST) and the term charges are $3,600, so the total loan from the finance company is $14,600.
- The tax codes and rates used in this support note are examples only. For the applicable tax to use in your circumstances, seek advice from the ATO or your accounting advisor.
- The Term Charges expense account may need to use the GST-free tax code whereas the Term Charges asset account and the finance company liability may need to use the NT tax code. Check with the ATO or your accounting advisor for clarification based on your business circumstances.
- Go to the Accounts command centre and click Accounts List.
- Click the Liability tab then click New. The Edit Accounts window is displayed.
- Set up a new Detail account as shown in the example below. Ensure you select Credit Card as the Account Type.
- Click OK.
- Go to the Accounts command centre and click Accounts List.
- Click the Asset tab then click New. The Edit Accounts window is displayed.
- Set up a new Detail account as shown in the example below.
- Click OK.
- Go to the Accounts command centre and click Accounts List.
- Click the Expense tab then click New. The Edit Accounts window is displayed.
- Set up a new Detail account as shown in the example below.
- Click OK.
- Go to the Banking command centre and click Spend Money. The Spend Money window is displayed.
- Enter the transaction as shown in the following example. Ensure you use the applicable accounts. Note in our example: The equipment being purchased is entered against a 'Plant & Equipment At Cost' asset account (1-2210), created to hold the value of business assets. Accounts like this may exist in your company file by default, or you can create a new one if applicable. The tax codes and rates used are examples only. For the applicable tax to use in your circumstances, please refer to your accounting advisor.
Note: If you were to recap this transaction before recording it (go to the Edit menu and choose Recap Transaction), the journal entries would appear as follows:
- Click OK.
To determine the periodic amounts to be paid, divide the total purchase price by the total amount of periodical payments. In this example the payment periods are monthly so divide $14,600 by 36 to determine the monthly repayment amount - in this case $405.56.
- Go to the Banking command centre and click Spend Money. The Spend Money window is displayed.
- Enter the transaction. Note: In our example show below, the tax codes and rates used are examples only. For the applicable tax to use in your circumstances, please refer to your accounting advisor.
- Click OK.