cost of Truck financed from a finance company

This query is : Resolved

seema singla (Querist)
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20 August 2009 A rice sheller purchases a truck on finance in April 2008. The bill of the truck is Rs. 8 Lacs. It got it finaced from a finace compnay for three years. The amt to be paid to the finance of is Rs. 11 Lacs.
My queries are
1) How this transaction will be recorded in the books. The finance co. will be credited by Rs. 11 Lacs and Truck account will be debited by Rs. 8 Lacs. What will be the treatment of Rs. 3 Lacs?????

2) Depricication is to be charged on what amount???????

3) The rice sheller uses it for its own business ie. to carry paddy, rice etc. Whether any income is to be shown from this truck seperately????

Please ans. as it is very very urgent.

UMA SHANKER SHARDA

UMA SHANKER SHARDA (Expert)
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20 August 2009 1. The truck shall be booked by Rs.8.00 Lacs. The financer shall be paid Rs.11.00 Lacs over a period of three years, hence the difference of Rs.3.00 Lacs shall be charged as interest in three years as per calculation either provided by the financer or you may calculate it at your own.
2. Depreciation shall be charged on Rs.8.00 Lacs.
3. If rice seller is using his truck for own business, he will not show any income directly. As saving of freight to be paid to out sider shall also increase his income.
U S Sharda