An owner brought a new car that he financed $13,000 with a 12% interest rate and put down a payment of $2,000. How do I record the interest payment?

ANSWER

The BIDaWIZ Team's Answer:

At the time of the purchase, debit the "vehicle asset account," in the amount of $13K. Credit "cash," in the amount of $2K, and credit a "note payable [liability]" account, in the amount of $11K. When each car payment is made, debit "interest expense;" debit the "note payable [liability]" account; and credit the "cash" account.