336 Other Notes & Contracts

Liabilities

Long Term

Synopsis

Account 336 is established to record long term loans on equipment lease purchase contracts, such as financing that might be provided by R&R, ADP or other equipment providers. Financing that may be provided by a seller to the current business owners from the sale of the business should also be placed in this account. Amounts due within the next 12 months (current portion) should be recorded in Account 314, Notes Payable - Other

Debits

Credits

Principal payments on loans

Notes payable to banks and other financial institutions from the purchase of dealership fixed assets.
The net present value of lease payments for capital lease obligations.
The amounts owed by the dealership entity to prior business owners from the sale of the business.

Example 1

Record the purchase of shop equipment financed with note payable to the vendor splitting out principal reductions due in the next 12 months.

Journal: General

Entry:		Debit	Credit
Account 282	Machinery & Shop Equipment	$125,000
Account 314	Notes Payable - Other		$17,845
Account 336	Other Notes & Contracts		$107,155

Example 2

Record payment number 15 of 60 on seller provided financing from purchase of business from prior owner.

Journal: Cash Disbursements

Entry:		Debit	Credit
Account 79*	Interest - Notes Payable (Other)	$1,234
Account 336	Other Notes & Contracts	$3,766
Account 202	Cash in Bank		$5,000

Note:

* = Interest should be allocated across departments based on methods described in Distribution of Expenses section of this manual.

Notes for the general capitalization of the company should be placed in Account 334 Notes Payable - Capital Loans.

Comments

A credit balance represents the liability on the note.

Amortization schedules should be maintained to allocate the principal and interest

payments for capital leases and term notes with blended periodic payments due.