Was this page helpful?
Thank you!

Comments or suggestions?

Enter Email Address (optional)

Track interest and principal separately for a loan given to a customer

Some businesses have the option of financing a loan for a customer when selling a larger item. For tax purposes interest income and sales income need to be tracked separately.   In this article we are going to set up this process for a car dealership.  The item names and processes can be customized for the individual business need. Please read through the directions before following them to verify this is the correct resolution for your business.

Detailed instructions

Step 1: Create Items

  1. Setup the Vehicle item.
    1. From the Lists menu, click Item List.
    2. In the Item list window, right click anywhere and select New.
    3. In the Type drop-down, select Inventory Part.
    4. In the Item Name/Number field, type the vehicle model.
    5. Enter the Cost and appropriate Cost of Goods Sold Account.
    6. Enter a Sales Price and choose an Income Account.
    7. Click OK to save this item.
  2. Setup the Interest item.
  3. From the Lists menu, click Item List.
  4. In the Item list window, right click anywhere and select New.
  5. In the Type drop-down, select Other charge.
  6. From the Account drop-down, select Customer Interest Income.
  7. Click OK to save the item.

Step 2: Sell the item to a customer

  1. From the Customers menu, click Customer Center.
  2. In the Customer Center, right click the appropriate customer and select Use Register.
  3. In the Customer register:
    1. Click the Item field and select the Vehicle item you want to sell.
    2. Make sure that your quantity, rate, amount charge, description and class are correct. If you have more than one Accounts Receivable, be sure to choose the one you want to use for vehicle loans in the Account field.
    3. Click Record. This will take you to the next empty line.
    4. In Item field, select the Vehicle Interest item.
    5. Make sure you have the correct information in all the fields listed in Step b.
    6. Click Record.

Note: The loan is now recorded. At this point the customer owes you the entire amount of the loan.


Step 3: Receive payment for the loan

  1. From the Customers menu, click Receive Payments.
  2. In the Receive From drop-down, select the customer you entered the charges for.
  3. Verify the A/R Account assigned to the transaction.
  4. The vehicle and interest charges will show up as two separate lines. In the Payment column, type the amount of payment for the vehicle and the interest.
  5. Click Save & Close.
  6. If you receive a warning that the payment does not equal the total of the invoice, select the option to leave the amount as an underpayment then click OK.

Note: Your customer balance reports will now reflect the loan as well as the payments. This method does not include calculations for Sales Tax. If you are in a state that requires a Sales Tax charge on items or interest you will need to contact your accountant for assistance with that set up.

KB ID# HOW13122
8/28/2016 12:01:40 AM
PPRDQSSWS403 9132 Pro 2016 5d3f5a