Purchasing an asset (a piece of equipment, a vehicle, land, etc) that you want to record on your Balance Sheet is a common bookkeeping workflow. This article will walk through how to record this in Ambrook for each of the following scenarios:
Buying an asset outright (e.g. with cash, check or ACH)
Buying an asset with a loan where the funds go straight to the seller (loan funds are never deposited in your account)
Buying an asset with a loan where the funds come into your account, then you make the purchase
For assets you purchased before you started your books in Ambrook, see Adding Assets to Ambrook.
This video will also walk through the process!
Buying an Asset Outright
For an asset you bought outright, for example with cash or a check, follow these steps to record it in Ambrook:
Create the asset account with a value of $0
Go to Balances and click "New Account" at the top of the screen.
Click the appropriate asset account type (Equipment, Vehicle, etc).
Set the Opening Date to the day of your asset purchase or a few days before.
Set the Opening Balance as $0.
Save the account - you'll now see it on your Balances page.
Tag the purchase transaction on your Ledger as an Asset Adjustment
Go to the Ledger and find the transaction for the purchase.
Note: If it was a cash transaction or doesn't show up on your Ledger, you can create it by clicking the "New" button at the top of the Ledger, selecting "Transaction" and creating the expense transaction for the purchase.
Click "category" on the purchase transaction.
Choose "Asset Adjustment" as the category tag.
Select your newly created asset account as the "To" account.
Click "Done" to save the adjustment.
You'll now see that the value of your asset on the Balances page is equal to the purchase transaction.
Buying an asset with a loan (funds taken directly by dealer/seller)
In this example, you are purchasing an asset using both a down payment and a loan you took out for the remaining amount. The total cost of the equipment was $10,000; you paid $2,000 using your credit card connected to Ambrook and took out a loan for the remaining $8,000.
The dealer took the money from the loan directly as part of the purchase, so you don’t see this transaction on your ledger. To set this up in Ambrook, you would use the following steps:
Create two custom accounts on your balance sheet: one for the loan, and one for the asset. You can do this by going to Balances -> New Account and creating one asset account (equipment, vehicle, etc) and one loan account. Set the opening balance for each of these accounts equal to zero, and the starting date as the date you purchased the asset.
Click on the loan account and click "Adjust Balance" to create a balance adjustment on the loan account for the total purchase price of the asset, including the sales tax in that total amount.
Click on the loan account and select “Filter Transactions” to easily find the balance adjustment you just made in the ledger. Then, tag that adjustment as an asset adjustment and apply it to your newly created asset account. This will establish the full cost basis of your asset.
Next, find the credit card transaction for $2,000 in the Ledger representing your down payment (if you didn't make a down payment you can skip this step). Tag this transaction as a Liability Adjustment to the loan account you created. This will reduce the amount of your loan by the down payment amount.
As you make payments on the loan in the future, these transactions will appear in your ledger. When you see one, be sure to check what the split between principal and interest is by using whatever documents your lender provides. Create two line items, and apply the principal amount to your loan account by using a Liability Adjustment tag and tag the interest expense as non-mortgage interest (learn more here).
Overtime, you can make sure you have been tagging correctly by checking that your loan balance is equal to the balance showing on your most recent statement from the bank or lender.
Buying an asset with a loan (loan funds are deposited in your bank account first)
In this example, you are purchasing an asset using both a down payment and a loan you took out for the remaining amount. The total cost of the asset was $10,000; you paid $2,000 from your bank account connected to Ambrook as a down payment and took out a loan for the remaining $8,000 through the bank.
The +$8,000 deposit for the loan shows up in your bank account, and then you wrote a check for $10,000 to the dealer to pay for the asset. To set this up in Ambrook, you would use the following steps:
Create two custom accounts on your balance sheet: one for the loan, and one for the asset. You can do this by going to Balances -> New Account and creating one asset account (equipment, vehicle, etc) and one loan account. Set the opening balance for each of these accounts equal to zero, and the starting date as the date you purchased the asset.
Go back to the Ledger and search for the deposit into your bank account that was the loan advance. Categorize that payment as a "Liability Adjustment" to the loan account you just created to represent the total amount you owed for that loan.
Next, find the -$10,000 check from your bank account you wrote to pay for the piece of equipment. Categorize that as an "Asset Adjustment" to the asset account you just created to establish the full cost basis of the piece of equipment on your balance sheet.
As you make payments on the loan in the future, these transactions will appear in your ledger. When you see one, be sure to check what the split between principal and interest is by using whatever documents your lender provides. Create two line items on the transaction, and apply the principal amount to your loan account by using a "Liability Adjustment" tag and tag the interest expense as non-mortgage interest (learn exactly how to tag loan payments here).
Overtime, you can make sure you have been tagging correctly by checking that your loan balance is equal to the balance showing on your most recent statement from the bank or lender.
This helps you show both the asset and liability balances while tracking the flow of money between accounts.