311 Notes Payable – Used Vehicles

Liabilities

Notes Payable

Synopsis

Account 311 is established to record the amounts paid or payable to financial institutions for Used Vehicle inventory financed on a short term line of credit.  This line of credit is secured by the vehicles themselves and is commonly referred to as the “floorplan”.

Debits

Credits

  1. The amount of payments made

 

  1. Notes payable on used vehicles

Example 1

Record a purchase of a used vehicle from auto auction in the amount of $14,795 and the car is added to the used car floorplan.  The purchase price includes an auction fee of $295.

Journal: Used Car Purchase

 

Entry:

 

Debit

Credit

Account 240

Inventory – Used Cars

$14,795

 

Account 311

Notes Payable – Used Vehicles

 

$14,795

Example 2

Record the monthly curtailment of the above note payable required by the financial institution in the amount of $296.

Journal: Payoff and Cash Disbursements

Entry:

 

Debit

Credit

Account 311

Notes Payable – Used Vehicles

$296

 

Account 202

Cash in Bank

 

$296

Example 3

Record the payoff of the above vehicle in the amount of $14,499 (after there has been a curtailment).

Journal: Payoff and Cash Disbursements

Entry:

 

Debit

Credit

Account 311

Notes Payable – Used Vehicles

$14,499

 

Account 202

Cash in Bank

 

$14,499

Comments

A credit balance represents the amount owed to finance institutions on notes secured by used vehicles.