Accounting for Car Dealers
What is a Car Dealers CPA?
Is a CPA that specializes the accounting and taxation for car dealers, same as retail or restaurants.
How do accountants manage Car Dealers?
There are 2 types of car dealers. One that finances their activities with a bank and the other one that finance themselves, in any of the case there are transactions that involve the collection of interest and the administration of debt. Whenever there is interest collected there should be a separation between the principal of the debt and the interest because when clients purchase a new or used car, they pay in bulk, for them it is irrelevant how much is the portion of interest and how much is the portion of principal. If someone is charging $300 monthly for a car that’s the only money that the payer sees, but for the dealer those $300 must be divided in 2, principal and the debt meaning that one portion will be reducing the debt and another will be the profit, the interest of the dealer for the sale of that car. That’s how the dealer create their profit, they purchase a car for $100 and then they sell it at $500, but they don’t get cash immediately but several years. For that $500 they are selling it they are going to get interest the client is going to pay, to make things easier the $500 plus the interest is divided into monthly payments and then the clients at the end of each month is going to bring that monthly payment to pay the principal and part of the interest during the time of the sale, this is the particular of a car dealer that needs to deal in monthly to separate the income that was received for interest and the principal of the debt that is not income for them.
What is Car Dealers bookkeeping?
Is basically the organization of the transactions from the bank statements and the separation of the principal and the interest for the classification of revenues for the car dealer. When the bookkeeper could be internal or external, he receives bank statements the only amount that the owner sees is the deposit amount, there is no separation of the loan that the owner has given and the interest, that is the work of a bookkeeper, separation of the transactions and correctly classification of those transaction for the creation of the income and expenses.
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What are the benefits of having a CPA specialized in Car Dealers?
The main benefit is the ability to provide good advice and help the car dealer to stay within the reporting time. For example, one thing we see that even though they have employees and payroll sometimes they don’t pay taxes in a monthly basis, and this is where the problem starts. It’s not only that the CPA is going to help you with the bookkeeping, accounting and organizing correctly transactions to produce the financial statements and the report for the IRS, it is also the need for control because the owner is always selling and producing more business so this is where the CPA works closely with the owner to prevent this from happening as the business needs many employees and those salesman they receive salary and commissions it is in the payment on payroll that sometimes car dealers because they money to pay expenses they do not pay taxes in a monthly basis to the IRS and this is where the accountant needs to check with the owner if this payroll tax is paid in a monthly basis to avoid the accumulation at the end of the year, because when they are not paid the IRS is going to come after the business and asses a lien on the property of the business so this is why having a CPA.
Readers should note that this article is only intended to convey general information on these issues and that FAS CPA & Consultants (FAS) in no way intends for the contents of this article to be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. This article cannot serve as a substitute for such professional services or advice. Any decision or action that may affect the reader’s business should not rely solely on the contents of this article, but should rather be consulted on with a qualified professional adviser. FAS shall not be responsible for any loss sustained by any person who relies on this presentation. This article is subject to change at any time and for any reason.
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