Initial entry for car purchase

by Rob
(Nanaimo BC)

My wife started a small house-cleaning business in partership with our daughter. Annoyed at the hassles of trying to use our much-in-demand personal vehicle for her business, she financed a new car strictly for the business; the car and insurance payments come directly from the business chequing account. Now she needs to set up her books to reflect this. How do we enter the value of the car and what is deductible and what is not? Is the total value a capital acquisition? We are still setting up her chart of accounts; we need to get this sorted out ASAP as tax season is here.


Partnerships have slightly different accounting than sole proprietorships. Each partner will need their own set of capital accounts as the income from the business flows through to the partners. Any money your wife or daughter withdraws from the business is not considered a business expense. These withdrawals will be recorded as draws in the capital accounts section for each partner.

It is very important that a written partnership agreement be in place which explaining how the profits and/or losses will be allocated. Assuming that each partner is not incorporated, their share of profits is reported and allocated on form T2125 Statement of Business or Professional Income.

A good way to set up your chart of accounts is to look at the tax form T2125 ... then feel free to modify it slightly (using sub-accounts) for information you feel you need to manage the business.

Vehicle Expenses are reported on Line 9281 of form T2125 for sole proprietorships ... however Line 9943 Other amounts deductible from your share of net partnership income (loss) is where partnerships report motor vehicle expenses.

Only the business portion of vehicle usage is tax deductible. If the vehicle is used 90% or more for business purposes, then the partnership can claim 100% of it's input tax credits ... but I would recommend you still keep an auto log to back up your tax deduction should you ever get audited.

The bookkeeping entry for the purchase of the vehicle is found in the article Common Bookkeeping Entries.

You will want to include a contra account on your balance sheet for Accumulated Amortization and an expense account on your income statement for Amortization Expense.

If you follow all the links in this posting, I think you will have the information you need to set up your books. Be aware that some of the rules may be slightly different for a partnership as explained above.

I hope this helps. If you have any more questions, please feel free to post back in the comments section below.

Comments for Initial entry for car purchase

Click here to add your own comments

Jan 02, 2012
Vehicle Purchase - What Accounts?
by: Jaryll

I just purchased a vehicle for the company with a deposit, trade in and financing.

I have no idea what accounts I need to set up in QuickBooks to keep track of payments etc.

section divider

Hi Jaryll,

You didn't really ask a question, just made a statement but I will assume you are looking for the bookkeeping entries you need to make.

Click here to obtain the entries. This may be one of the entries that you need an Insider's Pass for.

Sep 29, 2015
Car purchase
by: Joseph Patrick

I would be expecting that you would confirm the luxury car tax.

Editor's note: see IRS publication 946 for more information on the luxury car tax -

Click here to add your own comments

Return to Leases.

Share this page:
Enjoy this page? Please pay it forward. Here's how...

Would you prefer to share this page with others by linking to it?

  1. Click on the HTML link code below.
  2. Copy and paste it, adding a note of your own, into your blog, a Web page, forums, a blog comment, your Facebook account, or anywhere that someone would find this page valuable.

Enjoy A Tea Break With
Me Today. Let's Chat!

Use the search feature to quickly find the
information you're looking for.

Your Learning Curve!


Warm up your tea cup and check out these chats ...

Click on image above to read the chat.

Join Me On Facebook

Help support this site by "liking" me! Here's where I post current information.

Listed Under Websites NOT Local Business.
This website is NOT associated with the business operating in Bonnyville AB.

A Handy Reference