Setting Up The Chattel Mortgage As A Bank Account

Your accountant may prefer the Chattel Mortgage to be set up as a bank account in the Agrimaster file so the full liability can be brought into the Statement of Position. Please note that you will need to reconcile the new account each month. 

To set up the Chattel Mortgage as a bank account, we will be using the same purchase data in the above example and the finance charges outlined below.  

The following finance charges are also included:

• Stamp Duty $50.00.
• Interest $5,000.00.
• Finance Fee $25.00.

Further information that you may need:

• The deposit of $2,000 was paid on 10 March 2016.
• The Tax Invoice was dated 22 April 2016.
• The farmer received the supply of the new plant on 22 April 2016.
• Total of repayments to be made over 5 years of $25,075.
• Total Mortgage = $25,075.

Using the data above, follow the steps below to set up the Chattel Mortgage as a bank account:

1. Setup a new bank account “Chattel Plant (name i.e. ute)” with an opening balance of $0.00.
2. Create a cash transfer from the new Chattel Plant bank account to the Farm Cheque Account for $20,000. This will create a liability for the Chattel Mortgage.
3. Enter a transaction for 10^th March to record the cheque written for $2,000 deposit will be reconciled with the debit entry on the Farm Cheque Account reconciliation.
4. When reconciling the Chattel Plant bank account, the closing balance will be entered as a debit.
5. Record the following transactions for 22 April, 2016 in the Farm Cheque Account:  
   

   CODE	AMOUNT	GST	TOTAL
   Plant Purchase	$27,000	$2,700	$29,700 Dr
   Plant Sales	$7,000	$,700	$7,700 Cr
   Deposit			$2,000 Dr
   Total			$20,000 Dr

6. In the new Chattel Plant bank account, enter the following transactions for April 22: 
   

   CODE	AMOUNT	GST	TOTAL
   Chattel Interest	$5000	$0	$5000
   Stamp Duty	$50	$0	$50
   Bank Fees	$25	$0	$25

Next Step: Reconciling Chattel Plant Bank Account