[Question] Add vehicle to business account without spending money

[Phat Marc]

My business was given a vehicle which was invoiced at R50000, but we are not expected to pay the money. I know that I can't record an expense, so how do I balance out the increase in vehicles account?

[Dave A]

Was it a donation?
Or should it be recorded a a loan?

[Phat Marc]

Hi Dave, I guess I can choose between either donation or loan. What would the journal entries be either way?

[Dave A]

Well, the value of the vehicle is debited against a fixed asset account for the vehicle.
The question is what to post the credit entry against.

If it's a donation, then I suggest the credit is posted against an income received account named "Donations Received".
If it is financed via a loan which is not expected to be repaid within the next year, the credit is posted against a long term liability account.
If there is an expectation that the loan is repaid within 12 months, the credit entry should be posted against a current liability account.

[Phat Marc]

Thanks Dave that's a big help. There is always more than one way to skin a cat. I am going with donation, as I think it fits the situation best.
Thanks again.