Profit on sale of vehicle

[Morkelp]

Good morning all. Please could someone assist me in how to capture the following transaction. The owner put money into the business which was captured to his loan account. With this money he purchased a vehicle in the company's name and spent some more on fixing it up. He then sold it at a higher amount. He paid R100k for the vehicle, spent R30k and sold it for R165K . He now wants the profit credited to his loan account. Please can someone advise on what entries to post as I am stumped. Regards Mike

[CLIVE-TRIANGLE]

His loan was already credited with the full cost, so that is basically that.

The profit on disposal was realised by the company, not him.

The profit may of course be distributed to him, either in the form of remuneration or a dividend.

[Odwa]

It seems to me that he wants the company to owe him the profit.

Initially;

Dr Bank (say R100k)
Cr Loan account: Owner

Then;

Dr Vehicles (R130k)
Cr Bank

Dr Bank (R165k)
Cr Vehicles (carrying amount) (R130k)
Cr Profit on sale of vehicle (R35k)

Then if he wants the profit of R35k, then his loan account must be reduced. The profit is not his and it is not owed to him.

The only was he can get his hands onto this amount is if the profit is used by the company to pay off the shareholder loan.

Thus;

Dr Loan account
Cr Bank