October 30, 2016 admin

Finance Receivables—Current

Assets

FINANCE RECEIVABLES—CURRENT ASSET ACCOUNT
1280

ACCOUNT EXPLANATION
Portion of finance income currently due and payable to the dealership and amounts due from insurance companies for commissions earned on insurance policies sold.
TRANSACTIONS
  Jrnl. Dr. Cr.
  Finance income due and payable on finance sale of new car NV
    Finance Receivables—Current 1280
      Finance Income—New 5000
             
  Insurance commission on policy on used car UV
    Finance Receivables—Current 1280
      Insurance Income—Used 5120
             
   Deferred portion released from any contingency G
    Finance Receivables—Current 1280
      Finance Receivables—Deferred 1800
             
  Payment of earned finance income by finance institution CR
    Cash in Bank—General 1001
      Finance Receivables—Current 1280
           
  Charge-back by finance company due to prepayment on new car contract G  
    Finance Income—New   5000
      Finance Receivables—Current     1280
COMMENTS
  • Finance income withheld by finance institutions as security against possible repossession losses should be recorded in Account 1800, Finance Receivables—Deferred. When such income becomes currently payable, it should be transferred to Account 1280, Finance Receivables—Current.
  • As finance participation varies with each finance institution, income should be calculated and recorded on an individual contract basis when the sale of the vehicle is recorded.
  • Separate accounts should be maintained for each finance institution and insurance company. Accounts 1281 through 1289 may be used for this purpose.
  • Records should be reconciled each month with statements received from finance institutions and insurance companies.