806 Finance Income-New Vehicles

Finance & Insurance Activity

New Vehicle

Sales Synopsis

Account 806 is established to record the Finance Income generated as a result of selling retail finance contracts to lending institutions on New Vehicles.

Debits

Credits

Finance income on customer notes discounted relative to new vehicle sales
Finance charges included in customer notes receivable relative to new vehicle sales

Example 1

Record a new vehicle sale for the amount of $17,571 with a finance contract reserve of $300, sales tax of $879 and Registration fees of $125. The inventory value is $16,721.

Journal: New Vehicle Sales

Entry:		Debit	Credit
Account 205	Contracts in Transit	$18,575
Account 262	Due from Finance Companies	$300
Account 600-618	Cost of Sales – New Cars – Retail	$16,721
Account 400-418	Sales – New Cars – Retail		$17,571
Account 231	New Car Inventory		$16,721
Account 324A	Sales Taxes Payable – Excise Taxes		$879
Account 806	Finance Income – New		$300
Account 910	Document Handling Fees		$125

Note:

Finance income considered unearned on customer notes receivable may be deferred by establishing and crediting a separate general ledger account captioned Unearned Finance Income, which should be reported with Account 210, Notes Receivable - Customers on the trial balance. This account should be adjusted at month end through Account 806, Finance Income-New or Account 808, Finance Income-Used, as applicable with the portion of finance income considered earned.

Transactions, which are related, should be recorded in separate sub-accounts. Sub-accounts serve to keep records organized for future analysis and auditing. The sub-accounts in these examples are designated by a letter following the account number (suffix). Please refer to your DSP's instructions for establishing sub-accounts.