October 30, 2016 admin

Rental Vehicle Net Income

Adjustments to Income

DIVISION RENTAL VEHICLE NET INCOME ADDITIONS TO INCOME ACCOUNT
F L T C 5200

ACCOUNT EXPLANATION
Income and expense related to rental vehicles placed in service when the rental activity is part of the dealership operation. This account should also be used to record the discount fee on a car rental involving use by customer of a National Credit Card.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Rental fee collected from customer CR
    Cash in Bank—General 1001
      Rental Vehicle Net Income 5200
             
  Month-end accrual of earned rental fees SE
    Accounts Receivable—Other 1130
      Rental Vehicle Net Income 5200
             
  Monthly depreciation on rental vehicle in service SE
    Rental Vehicle Net Income 5200
      Accumulated Depreciation—Rental vehicles 1660
             
  Labor to repair rental vehicle I
    Rental Vehicle Net Income 5200
      Sales—Labor—Internal (at internal rate) 5730
           
  Rental vehicle transferred to used car inventory at a gain G  
    Inventory—Used Cars   1350
    Accumulated Depreciation—Rental Vehicles   1660
      Rental vehicles     1650
      Rental Vehicle Net Income (amount of gain)     5200
COMMENTS
  • This is a control account. Information as to the detailed supporting income and expense accounts to be maintained is contained in Vehicle Leasing and Rental.
  • Vehicles placed in rental service within the dealership operation should be recorded as inventory transfers at inventory value, excluding holdback and predelivery and conditioning allowance, not as vehicle sales. New vehicles sold to a separate rental organization, independent or owned, should be recorded as fleet sales. Units retired from rental service should be transferred to the used car department for disposal. Such transfers should be made at estimated wholesale value (less estimated reconditioning charges) with any difference from net book value being recorded in this account. Subsequent sales of these units should be recorded as used car sales.
  • Rental fees normally should be credited to income when collected. At month end, the amount of earned rental fees accrued through the end of the month should be recorded. This entry should be reversed at the beginning of the following month.
  • Accurate revenue and expense records should be maintained on each rental vehicle so that existing contracts can be evaluated in establishing future rentals.
  • Tax counsel should be obtained regarding the handling of rental vehicle income and expense for income tax purposes.