How do I transfer the balance from a traded-in vehicle to the new one so that it reflects the reduct

Old Tex

thecreator

Old Tex

NotACPA

Thanks for your input. I think you are talking about loan accounts. I didn't make it clear in my question that I am trying to close one asset account and transfer the remaining value to the new asset account. I've decided it probably beyond my accounting abilities (and maybe Quicken's) to do what I am trying to do. I'll just zero out the old vehicle asset account and start the new asset account from scratch.

Nothing in thecreator's reply (nor mine, in the other thread) suggested a Loan account.

Zero  out the old car ASSET account with a transfer of any amounts therein to the new car account.

Old Tex

Thanks for your input. I think you are talking about loan accounts. I didn't make it clear in my question that I am trying to close one asset account and transfer the remaining value to the new asset account. I've decided it probably beyond my accounting abilities (and maybe Quicken's) to do what I am trying to do. I'll just zero out the old vehicle asset account and start the new asset account from scratch.

Logically it would seem to work that way. But in double entry accounting, when I enter a credit (-) in the old asset account as a transfer to the new asset account, the value becomes a debit (+) in the new account. I'm not a CPA either and I give up trying make the transfer work. I have zeroed the old account and set up the new one with the value less the trade in amount. Thanks for your help.

NotACPA

Thanks for your input. I think you are talking about loan accounts. I didn't make it clear in my question that I am trying to close one asset account and transfer the remaining value to the new asset account. I've decided it probably beyond my accounting abilities (and maybe Quicken's) to do what I am trying to do. I'll just zero out the old vehicle asset account and start the new asset account from scratch.

A transfer will reduce (to $0) the amount in the old car account ... and increase the balance in the new car account by the same amount.

What about that do you not understand?  BOTH should be asset accounts ... because the cars are something that you own.

Perhaps, are you transferring the funds to a Loan account?

Old Tex

Thanks for your input. I think you are talking about loan accounts. I didn't make it clear in my question that I am trying to close one asset account and transfer the remaining value to the new asset account. I've decided it probably beyond my accounting abilities (and maybe Quicken's) to do what I am trying to do. I'll just zero out the old vehicle asset account and start the new asset account from scratch.

You are exactly right. But I want to show that the trade in reduced the initial price of the new vehicle, not increased it. I know there should be an accounting way to do this but I can't figure it out. That's why I'm not an accountant.

Tom Young

Thanks for your input. I think you are talking about loan accounts. I didn't make it clear in my question that I am trying to close one asset account and transfer the remaining value to the new asset account. I've decided it probably beyond my accounting abilities (and maybe Quicken's) to do what I am trying to do. I'll just zero out the old vehicle asset account and start the new asset account from scratch.

From a pure accounting point of view the old car did not change the initial cost of the new car. 

I would expect that you'd never go around telling people that an initial payment of, say, $5,000 in cash "reduced" the cost of the new car.  People would laugh out loud and point out that all you did was reduce the amount that you had to finance.  Same exact principle is in play here: you gave up a non-cash asset - the old car - in order to obtain a new car as such-and-such a price.

Let's say that the new car has a stated price of $45K and the dealer is willing to accept your old car at a value of $5K and finance the difference.  Here's the accounting

Debit (increase) New Car Account   $5K
Credit (decrease) Old car Account           $5K

Debit (increase) New Car Account   $40K
Credit (Increase) New Car Loan Account $40K

If there's any dollars left in the Old Car Account after that, you zero out the Account, recognizing gain or loss as appropriate.

Rick Gumpertz

Old Tex

Patricia Ponthier

thecreator

Old Tex.  I'm glad you got it, cuz I don't.  I've read all these posts and still don't understand.  I did exactly what you said you did.  I traded in my old Jeep ($19,000) on a new Jeep ($43,000).  I paid the balance in cash.  I created a new asset account for the new Jeep with an openng balance of $43K,  but when I transferred the $19K balance into that asset account, it increased it to $62K.  (For simplicity I'm omitting TTL etc.).  What am I missing here? Tom Young, sorry, I still don't get it.

Hi @ Patricia Ponthier ,

Look at the Invoice from the Car Dealership.

If the New Jeep ($43,000) was the Negotiate Retail Price for the New Jeep and they gave you  $19,000 for your Old Jeep, it reduced the Price paid for the New Jeep in Cash to $24,000 to the Dealership.

You do not transfer figures from the Old asset Account to the New Asset Account.
The Old Asset Account gets zeroed out. Because you used the Balance to help pay for the New Jeep. It does not influence the New Asset Account.

The New Asset Account always decreases in Value, it does not increase in Value.

But, you could put the Cash Price paid as the Value of the New Jeep in the Asset Account of $24,000 then add the Value (Trade-in) of the Old Jeep $19,000 to increase the Initial Value of the New Jeep to $43,000 then start reducing the price of the Value of the Jeep, yearly.

Tom Young

Old Tex.  I'm glad you got it, cuz I don't.  I've read all these posts and still don't understand.  I did exactly what you said you did.  I traded in my old Jeep ($19,000) on a new Jeep ($43,000).  I paid the balance in cash.  I created a new asset account for the new Jeep with an openng balance of $43K,  but when I transferred the $19K balance into that asset account, it increased it to $62K.  (For simplicity I'm omitting TTL etc.).  What am I missing here? Tom Young, sorry, I still don't get it.

What you're missing here - in terms of my original post about the accounting needed - was that the next entry after that, the one that actually dealt directly with the new car itself - used a "new car" price that was REDUCED FROM THE NEGOTIATED "NEW CAR" BY THE AMOUNT OF THE NEGOTIATED TRADE IN VALUE FOR THE OLD CAR.  Ergo, the net of the two entries comes back to the negotiated sales price. 

I'd bet there's a dozen different ways to enter this kind of transaction but they all should come back to the same result:

1. The asset value of the new car is the negotiated sales price
2. The old car is no longer on the balance sheet
3. Assuming the negotiated trade in value for the old car is different than the value of the car in Quicken, a gain or loss is recognized.
4. The "balancing" amount for all this activity is either a reduction of cash on your balance sheet if you paid cash, or an increase in a new liability on your balance sheet if you financed the purchase.

The only reason I used the method that I posted is that the original poster had something specific in mind:  "I want to show that the trade in reduced the initial price of the new vehicle."  (I told the original poster that the trade in didn't really reduce the price of the new vehicle - that's a negotiated number - but does decrease either the amount of cash out of pocked or increases the amount financed.)

Let me posit a transaction of "cash plus trade-in" with the following facts:

1. Negotiated sales price for new car is $50K
2. Negotiated trade in price for old car is $15K
3. Old car has a balance of $20K on your balance sheet
4. You're putting $6K down in cash
5. You're financing the remaining cost

Here's a "global entry" you could make in one fell swoop using any of the affected Accounts though it probably would be easier to break it down into discrete entries in various Accounts:

Debit (increase) NEW CAR Account            $50K
Debit (increase ) Trade-in Loss Category    $ 5K
Credit (decrease) OLD CAR Account                    $20K
Credit (decrease) CASH Account                           $ 6K
Credit (increase) CAR LOAN Account                    $29K

You can see the NEW CAR Account begins and ends at the correct $50K.
You've got a loss of $5K on the old car as the difference between its carrying value of $20K and the allowed $15K trade in value.
Your cash decreases by $6K.
The remainder to finance is ($50K - $6K -$15K) $29K.