Hire purchase setup - GST accrual basis


I need some help with the setup of accounts in Manager for the purchase of a company vehicle (asset) by means of hired purchase. I had a quick check but did not find a matching scenario in the forum or guides. Hopefully we could get some clear Manager step by step procedure. If I have missed something please point me in the right direction because this is something many small businesses have to do at the outset of their operation. Thank you.

Here is an example:
Vehicle Cost: $13 970.00 including GST
Deposit: $2 493.00
Total Outstanding on vehicle: $11 477.00

Hire Purchase
Loan Amount : $11 477.00 plus Establishment fee costs of $523.00
Total Loan Amount: $12 000.00
Period: Paid over 36 months
Monthly Payment: $423.47
Total Amount of Payments: $15 244.92
Total Interest Charges: $3 064.92 (Interest fixed at 14.95% over the whole term)

MYOB have a set of Tasks like this:
Task 1 - Create a liability account for the finance company
Task 2 - Create a liability account for the GST on acquisition
Task 3 - Create a tax code for the purchase
Task 4 - Create an asset account for the Term Charges
Task 5 - Create an expense account for the Term Charges
Task 6 - Record the initial purchase
Task 7 - Record the periodical payments

Any help will be greatly appreciated.

How do I record a loan payment which includes paying both interest and principal?
Tax Payable report doesn't match balance sheet
  1. First you should create Fixed asset and record the payment ($2 493.00) for fixed asset. See
  2. Then create liability account which will represent loan to the finance company
  3. Make the journal entry to:
  • debit vehicle fixed asset account which you will find under Fixed assets control account ($10 954.00)
  • debit Establishment fees expense account ($523.00)
  • credit loan account of the finance company ($11 477.00).

When you do periodical payments, make sure to split the payment so the interest is posted against some interest paid expense account and principal posted against loan account of the finance company.

After you make your last periodical payment (after 36 months), the balance of the loan account of the finance company will be exactly zero.


Hi Lubos,

I tried to record the transactions according to your above example however after I create a fixed asset (CAR) and enter the purchase cost, the amount shows in the Suspense Account as well.

Any suggestions or am I doing a wrong way?


Sorry, Please Ignore this, as I figured out, I was putting the amount in Opening Balance of the Fixed Asset, rather than Purchase.

However, I would like to know how to record the Split Payments (Interest & Principal). Is there a Menu Driven or I need to post a Journal?

In case of Journal, I would highly appreciate if you could please create a dummy transaction and share the screen shot?

Thanks in Advance.


When recording payment to someone, you can click Add line button which will allow you to split the payment so the amount can be allocated across multiple accounts.



Hi Lubos and team,

Thank you for this - I think I have got the process. Just a small thing:
“debit Establishment fees expense account ($523.00)” would we need to create under “Expenses” a new account called say “Loan Establishment Fees” or something else?
See below


The above was constructed like this:


If the journal entries are correct above how do we go about claiming the GST on the Hire Purchase? I suspect the next step is to create a Purchase Invoice based on the vehicle sales invoice from the vendor. If so, what account is used to pay the “Purchase Invoice” from the “Spend Money” on the purchase invoice screen? Only the Business bank accounts are listed under the “Paid From”.


Hi Lubos,

I guess that it has to be a journal entry to record Hire Purchase Asset. However, in addition to Compuit’s query I would like to know:

  • How do we record the split entry between Interest & Principal
  • How do we record the GST



First as Lubos suggested create a “Interest Paid Expense Account” in your Chart of Accounts.

In this example Monthly Payment are $423.47 and Total Interest Charges are $3 064.92
Therefore the monthly interest for 36 months is $85.14 per month.
So now as I see it $85.14 per month will be allocated to Interest Paid Expense Account and $338.33 will be allocated to the Principle / Loan Company Account. Well this is what I understand from Lubos comments. Does this make sense?


Thanks Mate, Appreciate it.

Just few queries here, sorry being naive:

  • How did you figure out the Total Interest Charges? Was that something provided to you by your finance company?
  • How do you record a Interest & Principal, I mean, is it going to be two separate entries or once Journal for both. Could you please show me a screenshot for any dummy entry for the same?

Thanks Once again.


Yes, the first part of you question is as per the finance agreement which will be stated somewhere in the conditions / terms of the hire purchase agreement.
Now the second part of your question is what I am not too sure about. But suspect you would select the bank account you wish to use to pay the finance company. Note the finance company you would have setup already / earlier under liabilities, as Lubos explained. Now from your chosen bank account select “spend money”.
Now what I did here before processing was to make certain that the Finance Company was also set-up as a “Payee”. Secondly I added some tracking codes (Loan and Loan Interest) by going to “Settings”, “Tracking Codes”. This will be handy for future reference and reporting as time goes by.

So below you can see how I split the payment to principle and to Interest.

Lubos can you confirm that this is correct and also how to handle the GST claim on the purchase value please?
The next thing will be depreciation but there are notes already on that.


Yes, that’s how repayments should be recorded if paid from bank account. Split the amount so principal goes to offset liability account balance and interest is added as an expense.

Don’t use “Tracking codes” though. No point.

Also don’t call the account Interest Paid Expense Account, just calling it Interest paid will do. Other than that, perfect.


Don’t create purchase invoice.

If the price for the car was GST inclusive, simply use GST tax code in journal entry on Fixed assets line. And also use the GST tax code on payment of $2,493.00 (deposit on car) from your bank account.

Without tax codes, your Purchase cost figure for the car under Fixed assets tab will be $13,970. Once you put tax codes in, the purchase cost will become $12,700 and the difference $1,270 will be GST credit to offset balance in Tax payable account.


Many thanks Lubos - I think I am almost there…

OK modified Journal entry as follows:

Is this Journal entry correct now?

So now if I check a Tax Summary on the day I get the GST on the purchased asset ($13970.00 including GST) as shown below which was expected:

Lubos, I think you may have used a different percent for calculating the GST because $1822.17 is the correct amount to be claimed (15%) in this case.


Yeah, I was using 10% tax rate is my example.

Journal entry is not correct though. What’s that third line “Deposit paid to UDC”? That shouldn’t be there.

Your previous journal entry was correct, you only had to put there GST tax code… so once again:

  • debit vehicle fixed asset account which you will find under Fixed assets control account ($10 954.00) + use GST tax code
  • debit Establishment fees expense account ($523.00)
  • credit loan account of the finance company ($11 477.00).

Deposit amount you have paid for the car ($2,493.00) should be recorded as regular payment under Bank accounts tab, Cash accounts tab or Expense claims tab based on what funds did you use. And the deposit should be allocated to Fixed assets account.


Sorry that was an incorrect snap shot - This is what I have:

The GST invoice I have reflects $13 970.00 incl GST so that is why I set the first line with the amount shown. I understand that to be the actual cost?


OK, if you debit bank account through journal entry, it’s correct too.

If you are not using Tracking codes, just disable that feature under Settings tab. No point seeing those fields everywhere if they are not actually used. Enable only feature you are actually using to keep things simple.


Thank you for your assistance Lubos. :smile: