DISTRIBUTION OF EXPENSES

087 Utilities

Expenses

Fixed

Synopsis

Account 087, Utilities is established to record the monthly amount paid or payable for water, electricity, and heating fuel consumed by the dealership other than Telephone expense, which is recorded in Account 074, Telephone.

Debits

Credits

1. Cost of fuel, electricity, water, etc.

Example 1

Record the monthly invoice of $4,781 for the electricity. The $4,781 is distributed to each department as shown in the example below.

Journal: Cash Disbursements and Purchase

Entry:		Debit	Credit
Account 087-01	Utilities – New Vehicles Department	$1,004
Account 087-02	Utilities – Used Vehicles Department	717
Account 087-03	Utilities – Lease & Rental Department	239
Account 087-05	Utilities – Mechanical Department	909
Account 087-06	Utilities – Body Shop Department	717
Account 087-07	Utilities – Parts & Accessories Department	765
Account 087-09	Utilities – General & Administrative	430
Account 300	Accounts Payable – Trade Creditors		$4,781

Distribution of Expenses

	Departmental Distribution
087 Utilities	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Utility charges for separate new truck showroom	Total expense
Electricity for separate used car lot		Total expense
Electricity or heating fuel applicable to several or all departments	Area or usage	Area or usage	Area or usage	Area or usage	Area or usage	Area or usage	Area or usage
Water applicable to several or all departments	Usage	Usage	Usage	Usage	Usage	Usage	Usage

Comments

Unless a Department operates from a separate, off-site facility, the Utilities expense should be pro-rated to each Department based on usage as indicated in the Expense Distribution table above.

088 Insurance - Other

Expenses

Fixed

Synopsis

Account 088, Insurance – Other is established to record the monthly provision to pay the policy premium for insurance coverage. Not included are premiums for real estate, which is posted to Account 085, Insurance – Buildings & Improvements; lease and rental units, which are covered under automobile liability policies; and worker’s compensation, which is recorded in Account 027, Employee Benefits.

Debits

Credits

1. Monthly provision for Insurance other than on real estate, improvements, lease and rental units and worker’s compensation

Example 1

Record the monthly expense for the commercial property in the amount of $1,250 and the garage keeper’s insurance in the amount of $7,000 that had been paid in advance. Both the $1,250 and the $7,000 are distributed to each department as shown in the example below.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 085-01	Insurance – Buildings & Improvements – New Vehicle Department	$225
Account 085-02	Insurance – Buildings & Improvements – Used Vehicle Department	188
Account 085-03	Insurance – Buildings & Improvements – Lease & Rental Department	88
Account 085-05	Insurance – Buildings & Improvements – Mechanical Department	225
Account 085-06	Insurance – Buildings & Improvements – Body Shop Department	187
Account 085-07	Insurance – Buildings & Improvements – Parts & Accessories Department	175
Account 085-09	Insurance – Buildings & Improvements – General & Administrative	162
Account 088-01	Insurance – Other – New Vehicle Department	1,470
Account 088-02	Insurance – Other – Used Vehicle Department	1,050
Account 088-03	Insurance – Other – Lease & Rental Department	140
Account 088-05	Insurance – Other – Mechanical Department	1,330
Account 088-06	Insurance – Other – Body Shop Department	700
Account 088-07	Insurance – Other – Parts & Accessories Department	1,260
Account 088-09	Insurance – Other – General & Administrative	1,050
Account 271	Prepaid Insurance		$8,250

Distribution of Expenses

	Departmental Distribution
088 Insurance - Other	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Accounts receivable							Total expense
Fidelity bond	Employees	Employees	Employees	Employees	Employees	Employees	Employees
Collision coverage for company-owned vehicles other than lease and rental units	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned
General contents	Department’s Percentage of Insured Contents	Department’s Percentage of Insured Contents	Department’s Percentage of Insured Contents	Department’s Percentage of Insured Contents	Department’s Percentage of Insured Contents	Department’s Percentage of Insured Contents	Department’s Percentage of Insured Contents
Valuable papers and records							Total expense
Plate glass and lettering in showroom (if separate from building insurance)	Total expense
Money and securities							Total expense
Business interruption and liability coverage	Department’s percentage of year-to-date gross profit	Department’s percentage of year-to-date gross profit	Department’s percentage of year-to-date gross profit	Department’s percentage of year-to-date gross profit	Department’s percentage of year-to-date gross profit	Department’s percentage of year-to-date gross profit
Umbrella coverage	Employees	Employees	Employees	Employees	Employees	Employees	Employees
Comprehensive garage liability	Employees	Employees	Employees	Employees	Employees	Employees	Employees

Comments

Premiums for policies such as the general garagekeepers policy, business interruption insurance, umbrella coverage, general contents & fire insurance, automobile coverage for company owned vehicles and other various policies are properly recorded in this account. In most cases, the premiums are paid in advance for annual, semi-annual, or quarterly terms. When this is the case, the premiums are recorded in Account 271, Prepaid Insurance and the monthly provision is posted to Account 088, Insurance - Other.

089 Taxes - Other

Expenses

Fixed

Synopsis

Account 089, Taxes – Other is established to record the monthly provision for taxes and licenses that cannot properly be recorded in any other account. Professional tax and accounting advice should be obtained regarding the proper classification and accounting for other taxes.

Debits

Credits

1. Monthly provision for taxes and licenses not otherwise provided for in any other account:

a. Personal property taxes

b. Gross Receipts taxes

c. Business Licenses

d. Permits

Example 1

Record the monthly expense of $1,250 for personal property taxes. The $1,250 is distributed to each department as shown in the example below.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 089-01	Taxes – Other – New Vehicle Department	$263
Account 089-02	Taxes – Other – Used Vehicle Department	187
Account 089-03	Taxes – Other – Lease & Rental Department	63
Account 089-05	Taxes – Other – Mechanical Department	237
Account 089-06	Taxes – Other – Body Shop Department	188
Account 089-07	Taxes – Other – Parts & Accessories Department	200
Account 089-09	Taxes – Other – General & Administrative	112
Account 270	Prepaid Taxes		$1,250

Distribution of Expenses

	Departmental Distribution
089 Taxes - Other	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Personal property taxes	Department’s percentage of taxable items	Department’s percentage of taxable items	Department’s percentage of taxable items	Department’s percentage of taxable items	Department’s percentage of taxable items	Department’s percentage of taxable items	Department’s percentage of taxable items
Tags for company owned vehicles other than lease and rental units	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned
Use taxes (not capitalized)	Equipment and supplies usage	Equipment and supplies usage	Equipment and supplies usage	Equipment and supplies usage	Equipment and supplies usage	Equipment and supplies usage	Equipment and supplies usage
General business licenses							Total expense
Specific business licenses	Operation licensed	Operation licensed	Operation licensed	Operation licensed	Operation licensed	Operation licensed
Gross receipt taxes	Year-to-date sales	Year-to-date sales	Year-to-date sales	Year-to-date sales	Year-to-date sales	Year-to-date sales
Taxes on specific signs	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised
Taxes on general signs							Total expense
Certification fees for technicians				Mechanical technicians certified	Mechanical technicians certified
Capital stock and franchise taxes not based on income							Total expense
Salespeople’s licenses	For new vehicle sales	For used vehicle sales	For leases

Comments

Whenever possible, Taxes – Other should be charged to the Department, which incurs the tax. If more than one Department is involved, the expense should be pro-rated based on usage. Please refer to the Expense Distribution table above.

090 Repairs - Equipment

Expenses

Fixed

Synopsis

Account 090, Repairs – Equipment is established to record the cost of performing repairs on equipment owned by the dealership and used in the auto business. The monthly provision for equipment service contracts is also posted to this account.

Debits

Credits

1. Cost of maintaining and Repairing Equipment other than company owned vehicles

Example 1

Record the cost of repairing a lift in the mechanical shop in the amount of $459.

Journal: Cash Disbursements and Purchase

Entry:		Debit	Credit
Account 090-05	Repairs – Equipment – Mechanical Department	$459
Account 300	Accounts Payable – Trade Creditors		$459

Example 2

Record the monthly expense of $350 for the maintenance contract on the copier machine.

Journal: Standard Journal

Entry:		Debit	Credit
Account 090-09	Repairs – Equipment – General & Administrative	$350
Account 274	Prepaid Expenses - Other		$350

Distribution of Expenses

	Departmental Distribution
090 Repairs - Equipment	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Repairs to body shop equipment					Total expense
Repairs to parts bins						Total expense
Maintenance contract on equipment	Equipment covered	Equipment covered	Equipment covered	Equipment covered	Equipment covered	Equipment covered	Equipment covered
Maintenance contract on service department lifts				Equipment covered	Equipment covered
Repair copying machine used in the general office							Total expense
Repairs to general office equipment							Total expense
Repairs to rented vehicles in company service (other than lease and rental units)	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned

Comments

The cost of repairs and maintenance contracts are debited to this account. When a repair is done for the benefit a single Department, the entire cost of the repair should be charged to the Department. When two (2) or more Departments are involved, the expense should be pro-rated to each respective Department based on usage as indicated in the Expense Distribution table above.

091 Depreciation - Equipment

Expenses

Fixed

Synopsis

The monthly provision to Depreciate Equipment owned by the dealership and used for the auto business is recorded in Account 091, Depreciation – Equipment. Professional tax and accounting advice should be obtained regarding the proper capitalization of equipment and the related depreciation schedule.

Debits

Credits

1. Monthly provision for Depreciation of Equipment

2. Excess of book value over appraised wholesale value of vehicles recorded in Account 285, Company Vehicles taken out of service and transferred to used vehicle inventories

1. Excess of appraised wholesale value over book value of vehicles recorded in Account 285, Company Vehicles taken our of service and transferred to used vehicle inventories

Example 1

Record the monthly provision of $4,490 for depreciation of machinery and equipment. . The monthly expense is pro-rated between the Mechanical and Body Shop departments as shown in the example below.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 091-05	Depreciation Equipment – Mechanical Department	$2,596
Account 091-06	Depreciation Equipment – Body Shop Department	1,894
Account 352	Accumulated Depreciation – Machinery & Equipment		$4,490

Example 2

Record the monthly provision of $1,063 for depreciation of parts and accessories.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 091-07	Depreciation – Equipment – Parts & Accessories Department	$1,063
Account 353	Accumulated Depreciation – Parts & Accessories		$1,063

Example 3

Record the monthly provision of $6,445 for depreciation of furniture and fixtures. The monthly expense is pro-rated to each department as shown in the example below.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 091-01	Depreciation – Equipment – New Vehicles Department	$1,325
Account 091-02	Depreciation – Equipment – Used Vehicles Department	950
Account 091-03	Depreciation – Equipment – Lease & Rental Department	675
Account 091-04	Depreciation – Equipment – Finance & Insurance Department	425
Account 091-05	Depreciation – Equipment – Mechanical Department	1,185
Account 091-06	Depreciation – Equipment – Body Shop Department	275
Account 091-07	Depreciation – Equipment – Parts & Accessories Department	350
Account 091-09	Depreciation – Equipment – General & Administrative	1,260
Account 354	Accumulated Depreciation – Furniture & Fixtures		$6,445

Example 4

Record the monthly provision of $2,370 for depreciation of company vehicles. The monthly expense is pro-rated to between the Mechanical Department and the Parts and Accessories Department as shown in the example below.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 091-05	Depreciation – Equipment – Mechanical Department	$875
Account 091-07	Depreciation – Equipment – Parts & Accessories Department	1,495
Account 355	Accumulated Depreciation – Company Vehicles		$2,370

Distribution of Expenses

	Departmental Distribution
091 Depreciation - Equipment	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Machinery and shop equipment				Equipment assigned	Equipment assigned
Parts and accessories equipment						Total expense
Company vehicles in Account 285, Company Vehicles	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned
Furniture and fixtures	Equipment assigned	Equipment assigned	Equipment assigned	Equipment assigned	Equipment assigned	Equipment assigned	Equipment assigned
Excess of book value over appraised wholesale value of a parts truck transferred to the used truck inventory for sale						Total expense

Comments

When only one Department has equipment subject to depreciation such as the air compressor, then the monthly provision to depreciate the air compressor should be charged to the Service Department. If two (2) or more departments share equipment such as the phone system, then the monthly provision should be pro-rated to each department based on usage.

092 Equipment Rental

Expenses

Fixed

Synopsis

Account 092, Equipment Rental is established to record the cost of Renting Equipment for the dealership other than Telephone expenses, which are recorded in Account 074, Telephone. The monthly rent or monthly provision is posted to this account.

Debits

Credits

1. Cost of Renting Equipment other than lease and rental units

2. Amounts charged other departments by the lease and rental department for the use of daily rental units, including those furnished to customers at no charge

Example 1

Record the monthly rental of $3,872 for the telephone system. The $3,872 is distributed to each department as shown in the example below.

Journal: Cash Disbursements and Purchases

Entry:		Debit	Credit
Account 092-01	Equipment Rental – New Vehicles Department	$813
Account 092-02	Equipment Rental – Used Vehicles Department	581
Account 092-03	Equipment Rental – Lease & Rental Department	77
Account 092-05	Equipment Rental – Mechanical Department	736
Account 092-06	Equipment Rental – Body Shop Department	387
Account 092-07	Equipment Rental – Parts & Accessories Department	697
Account 092-09	Equipment Rental – General & Administrative	581
Account 300	Accounts Payable – Trade Creditors		$3,872

Distribution of Expenses

	Departmental Distribution
092 Equipment Rental	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
General office furniture and equipment							Total expense
Parts bins						Total expense
Postage meters							Total expense
Used car lot signs		Total expense
Furniture and equipment used in new vehicle department	Total expense
Rental of vehicles for company use other than as lease and rental units	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned	Vehicles assigned
Dealership identification sign							Total expense
Charges by the lease and rental department for use of a daily rental unit furnished to a service customer at no charge				Department benefited	Department benefited

Comments

When the need arises to Rent specialized Equipment the rental cost is charged to the Department that benefits from the usage of the equipment. If two (2) or more Departments share the equipment, then the rental cost should be pro-rated to each respective Department based on usage.

097 Bonuses-Employees

Adjustments

Synopsis

Account 097, Bonuses-Employees, is established to record the bonuses paid to employees over the normal salary, wage or pay plan arrangements. The purpose of the bonus is to reward exceptional performance or productivity and to share in the success of the dealership. Bonuses should be used to provide incentives for doing a job well and remaining loyal to the dealership.

Debits

Credits

1. The amount of Bonuses paid to employees

2. The amount of the monthly provision for Bonuses to be paid to employees at a later date

1. The amount of the monthly provision for Bonuses to be paid to employees at a later date

Example 1

Record the monthly accrual of $2,500 for employee bonuses.

Journal: Payroll

Entry:		Debit	Credit
Account 097	Bonuses – Employees	$2,500
Account 328	Employee’s Incentives/Bonuses Payable		$2,500

Comments

Employees who are eligible to receive a bonus should be given the terms of the bonus plan in writing. The criteria for earning the bonus should also be discussed with each employee to make sure that there are no misunderstandings about the requirements for earning the bonus.

Bonus payments are subject withholding taxes and must be processed through the payroll system. When bonuses are paid each month, the amount of the bonus payment is debited to this account.

If the bonus is to be paid at a later date, such as the end of the year, the monthly portion of the earned bonus should be accrued by crediting Account 328, Employee’s Incentives/Bonuses Payable and debiting Account 097, Bonuses - Employees.

Note:

Since the prospect of earning a Bonus serves as an incentive for good work performance and receiving a Bonus is a reward for a job well done, the motivational benefits of paying bonuses is an important part of successful personnel management. It goes without saying that Bonuses should be paid promptly along with a word of recognition. When employees fail to earn available bonuses, a review of the employee’s performance is warranted.

098 Bonuses-Owners

Adjustments

Synopsis

Account 098, Bonuses-Owners, is established to record the amount of Bonuses paid or payable to Owners of the dealership. Professional tax and accounting advice should be obtained regarding the tax implications to both the dealership and the Owners due to Bonuses paid.

Debits

Credits

1. The amount of Bonuses paid to owners

2. The amount of the monthly provision for Bonuses to be paid to owners at a later date

1. The amount of the monthly provision for Bonuses to be paid to owners at a later date

Example 1

Record the monthly accrual of $30,000 for the owner’s bonus.

Journal: Payroll Journal

Entry:		Debit	Credit
Account 098	Bonuses – Owners	$30,000
Account 329	Owner’s Bonuses Payable		$30,000

Comments

When Bonuses are paid to Owners during the month, the amounts of the Bonus payments are debited to this account.

When Bonuses are paid at a later date, such as the end of the year, the monthly provision for the Bonuses should be credited to Account 329, Owner’s Bonuses Payable and debited to Account 098, Bonuses-Owners.

099 Income Taxes – Current Year

Adjustments

Synopsis

Account 099, Income Taxes – Current Year, is established to record the amount of Income Tax or estimated Income Tax due for Federal, State and/or Local Income Taxes. Professional tax and accounting advice should be obtained regarding the proper handling of Income Taxes due.

Debits

Credits

1. The monthly estimate of federal, State, and/or Local Income Tax

2. The amount to increase the income tax liability based on the final adjusted taxable income for the year

1. The amount to decrease the income tax liability based on the final adjusted taxable income for the year

Example 1

Record the monthly accrual of $93,750 for the federal and state income taxes.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 099	Income Taxes – Current Year	$93,750
Account 327	Income Taxes Payable		$93,750

Comments

An accrual should be set up by crediting Account 327, Income Taxes Payable with the estimated Income Taxes due. The offsetting credit is posted to Account 099, Income Taxes – Current Year.

Note:

Quarterly payment and filing dates should be observed to avoid penalties and interest.