acura dealer standard accounting manual dealer standard accounting manual revised january 2018...

Acura Dealer Standard Accounting Manual

Revised January 2018

Introduction ................................................................................ 1

Monthly Routine ......................................................................... 2

Management Operating Information ......................................... 3

Dealership Receivables ........................................................................ 3 Distribution of Personnel (Dealership personnel count) ........................ 3

New, Used Vehicle Inventory Analysis .................................................. 3 Parts & Accessories Inventory Analysis ................................................ 4 Service Department Data ...................................................................... 4 Absorption & Breakeven analysis .......................................................... 5

Chart of Accounts Summary – Acura ....................................... 8

Assets ................................................................................................... 8 Liabilities ............................................................................................... 8 Net Worth .............................................................................................. 8 Operating Accounts ............................................................................... 9

Expense Accounts ................................................................................ 9 Other Income ...................................................................................... 10

Other Deductions ................................................................................ 10

Chart of Accounts – Detail by Account ................................ A-1

A- ASSETS ............................................................................................ A-1

101 Petty Cash .................................................................................. A-2 102 Cash on Hand ............................................................................ A-3

104 Bank Accounts ........................................................................... A-4 105 Trust Account ............................................................................. A-5 107 Finance Contracts in Transit ...................................................... A-6

108 Marketable Securities ................................................................. A-7 109 Cash Sales Clearing................................................................... A-8

110 Vehicle Licenses Clearing .......................................................... A-9 115 Accounts Receivable - Customer Service, Parts, Body Shop .. A-10

116 Accounts Receivable - Vehicles ............................................... A-12 117 Accounts Receivable - Factory ................................................. A-13 119 Lease Receivables ................................................................... A-14

120 Warranty Claims ....................................................................... A-15 121 Marketing Allowance Receivable ............................................. A-16

122 Goods and Services Tax Receivable ....................................... A-18 123 Finance and Insurance Commissions ...................................... A-20 125 Allowance for Doubtful Accounts .............................................. A-21

130 New Vehicles ........................................................................... A-22 136 Demonstrators .......................................................................... A-25

138 Used Vehicles .......................................................................... A-27 139 Courtesy Vehicles – Inventory .................................................. A-28

140 Daily Rental Vehicles ............................................................... A-31 141 Other Inventories ...................................................................... A-32 142 Parts – Acura ........................................................................... A-33 144 Accessories – Acura................................................................. A-34 145 Parts – Other ............................................................................ A-35

146 Accessories - Other .................................................................. A-36 148 Tires ......................................................................................... A-37



149 Sublet Repairs .......................................................................... A-38

150 Labour in Process .................................................................... A-39 151 Gasoline (fuel), Oil and Grease ................................................ A-40

152 Paint and Body Shop Supplies ................................................. A-41 154 Prepaid Rent ............................................................................ A-42 155 Prepaid Taxes .......................................................................... A-43 156 Prepaid Insurance .................................................................... A-44 157 Other Prepaid Expenses .......................................................... A-45

165 Land ......................................................................................... A-46 167 Buildings ................................................................................... A-47 168 Accumulated Amortization - Buildings ...................................... A-48 1690 EDP Equipment ...................................................................... A-49 1691 Accumulated Amortization - EDP Equipment ......................... A-50

170 Building Fixtures ....................................................................... A-51 171 Accumulated Amortization - Building Fixtures .......................... A-52

172 Leasehold Improvements ......................................................... A-53

173 Accumulated Amortization - Leasehold Improvements ............ A-54 174 Office Equipment ...................................................................... A-55 175 Accumulated Amortization - Office Equipment ......................... A-56 176 Parts Department Equipment ................................................... A-57

177 Accumulated Amortization - Parts Department Equipment ...... A-58 178 Service Department Equipment ............................................... A-59

179 Accumulated Amortization - Service Department Equipment ... A-60 181 Signs ........................................................................................ A-61 182 Accumulated Amortization - Signs ........................................... A-62

183 Company Vehicles ................................................................... A-63 184 Accumulated Amortization - Company Vehicles ....................... A-65

185 Leased Vehicles ....................................................................... A-66 186 Accumulated Amortization - Leased Vehicles .......................... A-68

188 Refundable Deposits ................................................................ A-69 189 Investments .............................................................................. A-70

190 Organization Expense .............................................................. A-71 191 Life Insurance - Cash Values ................................................... A-72

192 Advances - Officers and Employees ........................................ A-73 193 Notes / Long-Term Accounts Receivable ................................. A-74 195 Goodwill ................................................................................... A-75

196 Finance Company Participation ............................................... A-76

B- LIABILITIES ...................................................................................... B-1

201 Bank Loan .................................................................................. B-2 205 Loans on New Vehicles .............................................................. B-3 206 Loans On Rental Vehicles .......................................................... B-4

207 Loans on Used Vehicles............................................................. B-5 208 Loans on Demonstrators / Courtesy vehicles ............................. B-6 209 Loans on Other Inventories ........................................................ B-7 210 Car Encumbrances .................................................................... B-8

212 Due on Repossession ................................................................ B-9 213 Current Portion - Long Term Debt ............................................ B-10 214 Customer Payments ................................................................. B-11

215 Trade Accounts Payable .......................................................... B-12



217 Payroll Deductions (To Include All Payroll Deductions)............ B-13

218 Factory Payable ....................................................................... B-14 219A Goods and Services Tax (Input Tax Credit) ........................... B-15

219B Goods and Service Tax (Payable) ......................................... B-18 220 Provincial Sales Tax ................................................................. B-21 221 Vehicle Sales Personnel Compensation .................................. B-22 222 Customer Deposits ................................................................... B-23 225 Accrued Payroll ........................................................................ B-24

226 Accrued Vacation Pay .............................................................. B-25 227 Accrued Interest ....................................................................... B-26 228 Bonuses ................................................................................... B-27 230 Deferred Marketing Allowance ................................................. B-28 231 Provision for Income Tax - Current Year .................................. B-30

232 Federal & Provincial Taxes - Prior Period ................................ B-31 233 Prepaid Income Tax ................................................................. B-32

234 Estimated Income Tax.............................................................. B-33

240 Notes Payable .......................................................................... B-34 246 Mortgage - Real Estate ............................................................ B-35 247 Deferred Taxes ........................................................................ B-36 248 Financing Leased Vehicles ...................................................... B-37

249 Chattel Mortgage ...................................................................... B-38 255 Other Long Term Debt ............................................................. B-39

256 Provision for Repossession ...................................................... B-40 260 Directors' or Shareholders' Loans ............................................ B-41

C- NET WORTH .................................................................................... C-1

280 Capital Stock Issued - Common ................................................. C-2 282 Capital Stock Issued - Preferred ................................................ C-3

285 Retained Earnings - Prior Years ................................................. C-4

286 Dividends ................................................................................... C-5

287 Investment - Proprietor or Partners ............................................ C-6 290 Withdrawals - Proprietor or Partners .......................................... C-7

299 Profit (Loss) Clearing.................................................................. C-8

D- SALES AND COST OF SALES ........................................................ D-1

301-315, New Vehicles ..................................................................... D-2 401-415 New Vehicles .................................................................... D-2

320 Internal New Vehicle .................................................................. D-4 420 Internal New Vehicle ................................................................ D-4

321 Fleet Sales ................................................................................. D-6

421 Fleet Sales ............................................................................... D-6 323 Certified Pre-Owned Acura – Retail ........................................... D-7

423 Certified Pre-Owned Acura – Retail ......................................... D-7

325 Non-Certified, Pre-Owned Acura - Retail ................................... D-9 425 Non-Certified Pre-Owned Acura – Retail ................................. D-9

327 Used Other – Retail .................................................................. D-11 427 Used Other – Retail ................................................................ D-11

332 Used Vehicle Wholesale .......................................................... D-12 432 Used Vehicle Wholesale ........................................................ D-12

350 Parts Wholesale ....................................................................... D-13



450 Parts Wholesale ..................................................................... D-13

352 Parts Retail Counter ................................................................. D-15 452 Parts Retail Counter ............................................................... D-15

354 Parts Customer Repair Order, Service ..................................... D-16 454 Parts Customer Repair Order, Service ................................... D-16

355 Parts Customer Repair Order, Body......................................... D-19 455 Parts Customer Repair Order, Body ...................................... D-19

356 Parts Warranty ......................................................................... D-20

456 Parts Warranty ....................................................................... D-20 358 Parts Internal ............................................................................ D-21

458 Parts Internal .......................................................................... D-21 359 Accessories – Acura................................................................. D-22

459 Accessories – Acura .............................................................. D-22

360 Accessories – Other ................................................................. D-24 460 Accessories – Other ............................................................... D-24

362 Tires ......................................................................................... D-26

462 Tires ....................................................................................... D-26 365 Gas, Oil & Grease .................................................................... D-27

465 Gas, Oil & Grease .................................................................. D-27 367 Miscellaneous .......................................................................... D-28

467 Miscellaneous ........................................................................ D-28 370 Labour Customer Repair Orders, Service ................................ D-30

470 Labour Customer Repair Orders, Service .............................. D-30 371 Labour Customer Repair Orders, Body & Paint ....................... D-33

471 Labour Customer Repair Orders, Body & Paint ..................... D-33

372 Labour Warranty, Service ......................................................... D-34 472 Labour Warranty, Service ...................................................... D-34

374 Labour Internal, Service ........................................................... D-35 474 Labour Internal, Service ......................................................... D-35

375 Labour Internal, Body & Paint .................................................. D-36 475 Labour Internal, Body & Paint ................................................ D-36

376 Labour P.D.I., Service .............................................................. D-37 476 Labour P.D.I., Service ............................................................ D-37

377 LOF/Express Labour ................................................................ D-39 477 LOF/Express Labour .............................................................. D-39

379 Labour Warranty, Body & Paint ................................................ D-40

479 Labour Warranty, Body & Paint .............................................. D-40 382 Sublet Repairs, Service ............................................................ D-41

482 Sublet Repairs, Service .......................................................... D-41 383 Sublet Repairs, Body & Paint ................................................... D-42

483 Sublet Repairs, Body & Paint ................................................. D-42 385 Supplies, Body & Paint ............................................................. D-43

485 Supplies, Body & Paint ........................................................... D-43 390 Lease Income - Leased Vehicles - Acura ................................. D-44 391 Lease Income - Leased Vehicles - Other Makes ...................... D-45

392 Rental Income .......................................................................... D-46 394 Lease and Rental Disposal Sales ............................................ D-47

494 Lease and Rental Disposal Sales .......................................... D-47 424 Certified Pre-Owned Acura Reconditioning .............................. D-48 426 Non-Certified Pre-Owned Acura Reconditioning ...................... D-49



428 Used Other Reconditioning ...................................................... D-50

435 Inventory Revaluation............................................................... D-51 463 Parts Discount Earned ............................................................. D-52

464 Parts Inventory Adjustment ...................................................... D-53 480 Unapplied Time, Service .......................................................... D-54 481 Unapplied Time, Body & Paint ................................................. D-55 490 Amortization, Interest, Maintenance, Leased Vehicles, Acura . D-56 491 Amortization, Interest, Maintenance, Leased Vehicles, Other Make ............................................................................................... D-57 492 Amortization, Interest and Vehicle Maintenance ...................... D-58

E- EXPENSES ....................................................................................... E-1

Expense Distribution ............................................................................ E-2 01 Compensation - Vehicles Sales Personnel .................................. E-8

02 Compensation - Finance & Insurance ........................................ E-10

03 Pre - Delivery ............................................................................. E-11 05 Policy Inspection ........................................................................ E-12

20 Salaries - Managers ................................................................... E-13 21 Salaries - Owners ....................................................................... E-14 22 Salaries - Others ........................................................................ E-15 23 Absentee And Vacation Pay ....................................................... E-16

24 Employee Benefits ..................................................................... E-17 30 Office Supplies ........................................................................... E-18

31 Shop Tools - Sundry Supplies .................................................... E-19 32 Courtesy Vehicles ...................................................................... E-20 34 Laundry - Uniforms ..................................................................... E-24

35 Janitor Services - Cleaning ........................................................ E-25 36 Postage ...................................................................................... E-26

37 Policy Adjustments ..................................................................... E-27

38 Advertising ................................................................................. E-28

39 Donations ................................................................................... E-31 41 Company Vehicles ..................................................................... E-32

42 Inventory Maintenance - Vehicle Department ............................ E-33 44 Data Processing ......................................................................... E-34

45 Training ...................................................................................... E-35 46 Travel - Entertainment ................................................................ E-36 47 Telephone - Fax ......................................................................... E-37 48 Membership Dues & Subscriptions ............................................ E-38 49 Freight - Express ........................................................................ E-39

50 Outside Services ........................................................................ E-40 51 Audit, Legal And Collection ........................................................ E-41 52 Miscellaneous ............................................................................ E-42

53 Interest & Bank Charges ............................................................ E-43 54 Floor Plan Interest ...................................................................... E-44 60 Rent And/Or Mortgage Interest .................................................. E-46 61 Amortization of Leasehold Improvements .................................. E-47

62 Property Maintenance ................................................................ E-48 63 Property Taxes ........................................................................... E-49 64 Building Insurance ...................................................................... E-50

65 Building Amortization ................................................................. E-51



68 Business And Other Taxes ......................................................... E-52

69 Amortization - Equipment and Fixtures ...................................... E-53 70 General Insurance ...................................................................... E-54

73 Maintenance of Equipment ......................................................... E-55 74 Heat, Light, Power And Water .................................................... E-56 75 Equipment Rental ....................................................................... E-57 78 Amortization of Deferred Charges and Intangibles ..................... E-58 80 Licenses (Company Only) .......................................................... E-59

90 Marketing Allowance for New Vehicles Sold .............................. E-60 91 Acura Concierge / AAFP Fund ................................................... E-62 99 Bonuses - Owners ...................................................................... E-63

F- OTHER INCOME AND DEDUCTIONS ............................................. F-1

701 Contract Reserves- New ............................................................ F-2

702 Extended Warranty Income- New .............................................. F-3

752 Extended Warranty Income- New .............................................. F-4 703 – Acura Product Including Insurance ......................................... F-5

753 –Acura Product Inc. Insurance ................................................... F-6 704 – Non-Acura Product Including insurance .................................. F-7 754 – Non-Acura Product Including insurance .................................. F-8 705 Repossession Losses and Charge Backs - New ........................ F-9

706 Finance Income - Used ............................................................ F-11 707 Protection Plan Income - Used ................................................. F-12

757 Protection Plan Income - Used ................................................. F-13 708 Other Merchandise – Used ...................................................... F-14 758 Other Merchandise – Used ...................................................... F-15

709 Repossession Losses and Charge Backs - Used .................... F-16 801 Cash Discount Earned ............................................................. F-18

802 Interest Earned ......................................................................... F-19

804 Bad Debts Collected................................................................. F-20

806 Compensation Earned - Sales Tax .......................................... F-21 810 Miscellaneous .......................................................................... F-22

853 Cash Discount Allowed ............................................................ F-23 854 Bad Debt Expense ................................................................... F-24

856 Director's Fees ......................................................................... F-25 860 Miscellaneous .......................................................................... F-26

Index .......................................................................................... F-i


Revised January 2018 1

Introduction Honda Canada Inc. is pleased to present this revised Standard Accounting Manual in a web-based format. We have expanded the manual to provide precise account definitions, clear accounting instructions and comments about proper utilization and guidelines for interpreting the account balance. We hope that this Manual will be helpful in setting up your internal accounting procedures. We also hope that the individual pages will serve as a training aid for new employees. By adhering to Standard Acura accounting procedures, your monthly Financial Statements will become a better management tool. You will be able to apply Acura guidelines in order to improve operational efficiency and get the most from your dealership. We ask that you keep good records, prepare and submit your monthly Financial Statements on time. By doing so, we will be able to provide feedback that will benefit your dealership directly. Your Financial Statements are your scorecards to let you know when you are improving and by how much. Our Acura guidelines will provide benchmarks that will help you set objectives for your managers and make adjustments to produce more profit.

With respect to issues relating to taxation, we strongly recommend that you seek professional tax and accounting advice. Due to the complexity of tax laws, we cannot provide individual counsel in this area. Matters relating to taxes are beyond the scope of this Manual.

We sincerely hope that our efforts in this area provide additional value to being an Acura dealer. It is one example of our intention to support you, your dealership and your employees. We look forward to working with you in the years to come and to see your progress each month along the way. Sincerely, Dealer Development Honda Canada Inc.



Monthly Routine

Prepare the Monthly Financial Statement to the nearest dollar (no cents). The accounting staff should arrange to have the financial statement completed by the 10th of the following month for submission to Honda Canada Inc. no later than the 15th of that month, via the HONDACOM system.

At the end of each month, several steps should be taken to facilitate the preparation of the Financial Statement.

1. The Petty Cash Fund should be replenished. 2. Review Payables and process for payment by stipulated deadlines in

order to avoid late payment penalties and interest. Verify that Purchase Orders have been properly prepared for all invoices received.

3. All bank balances should be reconciled with bank statements. 4. Prepare a schedule of finance contracts receivable. 5. Receivables should be aged and reconciled - Doubtful Accounts

should be reserved against and expensed as Bad Debts. 6. Prepare various inventory schedules for New Vehicles, Used Vehicles,

Rental Vehicles, Other Inventories, Sublet Repairs, Tires, Labour in Process, Paint & Body Shop Supplies, Gas, Oil & Grease, and miscellaneous assets. Reconcile with actual physical inventory on hand. Adjust account balances in the General Journal as necessary.

7. Make necessary adjustments to Prepaid Expenses. 8. Record the monthly Amortization of Fixed Assets. 9. Reconcile balances of Car Encumbrances, Customer Payments Trade

Accounts Payable, Payroll Deductions, Factory Payable, G.S.T. & P.S.T. Payable, Vehicle Sales Personnel Compensation, and Customer Deposits.

10. Set up accruals for Payroll, Vacation Pay, Accrued Interest, Accrued Bonuses, and Taxes and any other expense that has not been recorded through normal processes, yet which applies to that month.

11. Estimate and post Income Tax Liability. 12. Balance all Journals and post summaries to the General Ledger

(manual bookkeeping). 13. Post adjusting entries to the General Ledger as necessary. 14. Prepare and review the Trial Balance for accuracy. 15. Prepare the Financial Statement.



Management Operating Information

This section, on page 5 of the Financial Statement, is intended to provide information which is useful in assessing productivity. It covers:

Dealership Receivables Service Department Data Distribution of Personnel (Dealership Personnel Count) New and Used Vehicle Inventory Analysis Absorption and Break-Even Analysis

Dealership Receivables

This section summarizes the following accounts and provides an aging summary detailing the Receivables which are Current, 31 – 60 days past due, 61 – 90 days past due and over 90 days past due.

Account 115, Accounts Receivable – Customer Service, Parts, Body Shop

Account 116, Accounts Receivable – Vehicles

Account 118, Notes Receivable

Account 119, Lease Receivables

Account 125, Allowance for Doubtful Accounts

Account 117, Factory Receivables

Account 120, Warranty Receivables

Account 123, Finance & Insurance Commissions

Account 122, Miscellaneous Receivables

Total Receivables should agree with page 1, line 20.

Distribution of Personnel (Dealership personnel count)

Please provide number of employees by category and department. Use only whole numbers to report the Personnel Count. For employees that support more than one department such as administrative staff, assign each respective employee to the department that receives the majority of the service. Dealer Principals and General Managers may be assigned to the New Vehicle Department. Do not assign employees to the Body Shop if the dealership does not have a Body Shop. The same applies to the "Other" Department.

New, Used Vehicle Inventory Analysis

Please provide an aged analysis of new and used vehicles in inventory by both units and dollars. The total in units and dollars of both new and used vehicles should agree with the respective inventory statistics on page 1 of the Financial Statement.



Parts & Accessories Inventory Analysis

The Parts and Accessories Inventory Analysis is designed to provide ageing of dealerships’ Acura Parts and Accessories Inventories. This section includes columns for both units and dollar values.

Units refer to the number of pieces in the dealership’s parts inventory at the end of the period and dollars refer to the cost value of this inventory. These details should be available on the Parts management report from your dealership’s management system (i.e., DMS – ADP, Reynolds and Reynolds, PBS, SERTI, DIS, etc.). Please note that this inventory analysis is for Acura Parts and Accessories inventory and specifically excludes tire inventory as well as parts and accessories inventory other than Acura.

Service Department Data

Available Time is the actual time technicians were available for work (i.e. 5 technicians @7 hrs/day = 35 hrs/day total Available Time). It does not include holidays, sick leave, etc.)

Clocked R.O. Time is the time which the technician(s) actually used to perform the repair(s).

Charged Out Time is the time that was charged to the Customers on the repair order, and mostly reflects flat rate times or menu priced items.

Customer Pay Time is the time that was charged to Customers on the repair orders, and mostly reflects flat rate times or menu priced items.

Warranty Time is the time that was charged to Warranty on repair orders, and mostly reflects flat rate times or menu priced items.

Internal Time is the time that was charged to Internal departments on repair orders, and mostly reflects flat rate times or menu priced items.

Customer R.O.'s summarizes the number of Customer repair orders written for that month and year to date (do not include Warranty or Internal repair orders).

Total R.O.'s is the number of all repair orders written, including Internal, Warranty P.D. I. and Express Labour.



Average Technician Hourly Wage

is the average hourly compensation for all technicians. In the case of straight time operation, total the hourly wages for all the technicians and divide by the number of billed hours. In the case of flat rate operation, divide total wages paid by total available time ($ + hrs.).

Customer Labour Rate is the hourly rate charged to Customers during the period of the Financial Report.

Warranty Labour Rate is the hourly rate paid by Honda Canada for repairs performed under warranty, for the period of time of the Financial Report.

Internal Labour Rate is the hourly rate charged by the Service Department to other Departments, such as sales, etc.

Bays is the number of available productive work stalls contained inside the Service and Body Shop areas.

Active Customers in File is the number of Customers that have visited the dealer during the last 12 months at least twice for service or maintenance.

Service Potential is the number of Units In Operation (U.I.O)

Absorption & Breakeven analysis

Absorption and breakeven analysis provides information on gross profit generation and its coverage of fixed overhead. This is represented in terms of absorption and new unit break-even.

VARIABLE GROSS PROFIT (L)

is the sum of the gross profits for both "New and Used Vehicle Department, from page 4.

VARIABLE SELLING EXPENSES (M)

is the sum of the New and Used Vehicle Selling Expenses, from page 2.

VARIABLE SALES PROFIT (N)

is the Variable Gross Profit less the Variable Selling Expenses.

(L – M)

CONTRIBUTION PNVS (O) is the Variable Sales Profit (N) divided by the number of New Vehicles Sold.



N / PNVS

FIXED GROSS PROFIT (P) is the gross profit from all departments excluding New and Used Vehicle Departments.

TOTAL FIXED OVERHEAD (Q)

is the total of Semi-Fixed and Fixed Expenses from page 2.

MARKETING ALLOWANCE + AAFP FUND + OTHER INCOME AND DEDUCTIONS (R)

is the total of marketing allowance, AAFP Fund, and the net of Other Income and Deductions from page 2.

UNABSORBED OVERHEAD (S)

is the Total Fixed Overhead not absorbed by Fixed Gross Profit and Other Income.

Q - (P + R)

ABSORPTION (T) is the percentage of Total Fixed Overhead, which is covered by the Fixed Gross Profit.

P x 100 / Q

UNIT BREAKEVEN (U) is the unabsorbed overhead divided by the Contribution PNVS. If your break-even figure was 19, for example, this would indicate that the dealership would have to sell 19 new units to break-even.

S / O



Chart of Accounts Summary – Acura Assets

Cash & Equivalent 101 Petty Cash 102 Cash on Hand 104 Bank Accounts 105 Trust Account 107 Finance Contracts In Transit 108 Marketable Securities 109 Cash Sales Clearing 110 Vehicle Licenses Clearing

Receivables 115 Accounts Receivable - Cust. Service, Parts, Body Shop 116 Accounts Receivable - Vehicles 117 Accounts Receivable - Factory 119 Lease Receivables 120 Warranty Claims 121 Marketing Allowance Receivable 122 G.S.T. Receivable 123 Finance & Insurance Commissions 125 Allowance For Doubtful Accounts

Inventories 130 New Vehicles 136 Demonstrators 138 Used Vehicles 139 Courtesy Vehicles - Inventory 140 Daily Rental Vehicles 141 Other Inventories 142 Parts – Acura 144 Accessories - Acura 145 Parts - Other 146 Accessories – Other 148 Tires 149 Sublet Repairs 150 Labour In Process 151 Gasoline (Fuel), Oil & Grease 152 Paint & Body Shop Supplies

Prepaid Expenses 154 Prepaid Rent 155 Prepaid Taxes 156 Prepaid Insurance 157 Other Prepaid Expenses

Fixed Assets 165 Land 167 Buildings 168 Accumulated Amortization - Buildings 1690 EDP Equipment 1691 Accumulated Amortization - EDP Equipment 170 Building Fixtures 171 Accumulated Amortization - Building Fixtures 172 Leasehold Improvements 173 Accumulated Amortization - Leasehold Imp. 174 Office Equipment 175 Accumulated Amortization - Office Equipment 176 Parts Department Equipment 177 Accumulated Amortization - Parts Dept. Equip. 178 Service Department Equipment 179 Accumulated Amortization - Service Dept. Equip. 181 Signs 182 Accumulated Amortization - Signs 183 Company Vehicle 184 Accumulated Amortization - Company Vehicles 185 Leased Vehicles 186 Accumulated Amortization - Leased Vehicles

Other Assets 188 Refundable Deposits 189 Investments 190 Organization Expense 191 Life Insurance - Cash Values 192 Advances - Officers & Employees 193 Notes / Long Term Accounts Receivable 195 Goodwill

Liabilities Bank & Finance Company

201 Bank Loan 205 Loans On New Vehicles 206 Loans On Rental Vehicles 207 Loans On Used Vehicles 208 Loans On Demonstrators / Courtesy Vehicles 209 Loans On Other Inventories 210 Car Encumbrances 212 Due On Repossession 213 Current Portion - Long Term Debt 214 Customer Payments

Accounts Payable 215 Trade Accounts Payable 217 Payroll Deductions 218 Factory Payable 219A Goods And Service Tax (Input Tax Credit) 219B Goods And Services Tax (Payable) 220 Provincial Sales Tax 221 Vehicle Sales Personnel Compensation 222 Customer Deposits

Accrued Liabilities 225 Accrued Payroll 226 Accrued Vacation Pay 227 Accrued Interest 228 Accrued Bonuses 230 Deferred Marketing Allowance 231 Provision For Income Tax - Current Year 232 Federal & Provincial Taxes - Prior Period 233 Prepaid Income Tax

Long Term Liabilities 240 Notes Payable 246 Mortgage - Real Estate 247 Deferred Taxes 248 Financing Leased Vehicles 249 Chattel Mortgage 255 Other Long Term Debt 256 Provision For Repossessions 260 Directors' Or Shareholders' Loans

Net Worth 280 Capital Stock Issued - Common 282 Capital Stock Issued - Preferred 285 Retained Earnings - Prior Years 286 Dividends 287 Investment - Proprietor Or Partners 290 Withdrawals - Proprietor Or Partners 234 Estimated Income Tax 299 Profit And Loss Clearing



196 Finance Company Participation

Operating Accounts

New Vehicle

Acura Sales COS 304 404 ILX 308 408 TLX 309 409 RLX 310 410 RLX Hybrid 312 412 RDX 313 413 MDX 315 415 NSX 320 420 Internal - New Vehicle 321 421 Fleet Sales

Used Vehicles Sales COS 323 423 Certified Used Acura - Retail

424 Certified Used Acura - Reconditioning 325 425 Non-Certified Used Acura - Retail

426 Non-Certified Used Acura - Reconditioning 327 427 Used Other - Retail

428 Used Other Reconditioning 332 432 Used Vehicle Wholesale

435 Inventory Revaluation

Parts 350 450 Parts - Wholesale 352 452 Parts - Retail Counter 354 454 Parts - Customer Repair Order, Service 355 455 Parts - Customer Repair Order, Body Shop 356 456 Parts - Warranty 358 458 Parts - Internal 359 459 Accessories - Acura 360 460 Accessories – Other 362 462 Tires

463 Parts Discount Earned 464 Parts Inventory Adjustment

365 465 Gas (Fuel), Oil & Grease 367 467 Miscellaneous

Service 370 470 Labour - Customer Repair Orders, Service 372 472 Labour - Warranty, Service 374 474 Labour - Internal, Service 376 476 Labour - P.D.I., Service 377 477 Express Labour

480 Unapplied Time - Service 382 482 Sublet Repairs - Service

Body Shop 371 471 Labour - Customer Repair Orders, Body &

Paint 375 475 Labour - Internal, Body & Paint 379 479 Labour - Warranty, Body & Paint

481 Unapplied Time, Body & Paint 383 483 Sublet Repairs - Body & Paint 385 485 Supplies - Body & Paint

Lease & Rental 390 Lease Income - Leased Vehicles - Acura

490 Amortization, Interest, Maintenance - Leased Vehicles - Acura

391 Lease Income - Leased Vehicles - Other Makes 491 Amortization, Interest, Maint. - Leased Vehicles - Other Makes

392 Rental Income 492 Amortization, Interest, & Vehicle Maintenance - Rental Vehicles

394 494 Lease & Rental Disposal Sales

Finance & Insurance Income 701 Contract Reserves - New 702 752 Extended Warranty Income - New 703 753 Acura Product Inc. Insurance 704 754 Non –Acura Prod Inc. Insurance 705 Repossession Losses & Chargebacks - New 706 Finance Income - Used 707 757 Extended Warranty Income - Used 708 758 Other Merchandise - Used 709 Repossession Losses & Chargebacks -

Used

Expense Accounts The Expense Accounts consist of four (4) digits. Expenses for each department are organized by the following account ranges:

New Vehicle 1200 – 1280

Used Vehicle 1300 – 1380

Parts 1400 – 1480

Service 1500 – 1580

Body Shop 1600 – 1680

Leasing 1800 – 1880

Other 2800 – 2880

Each Expense Account number is formed by using the department range above and appending the two (2) digits identifying code below. For example, New Vehicle Compensation - Vehicle Sales Personnel is Account Number 1201; Used Vehicle Compensation - Vehicle Sales Personnel is 1301. This pattern is to be applied to all Expense Accounts in order to charge the correct amount to each department. Please refer to the Accounting Manual for a complete discussion of Expense Distribution.



Variable Selling Expenses 01 Compensation - Vehicle Sales Personnel 02 Compensation - Finance & Insurance 03 Pre-Delivery 05 Policy Inspection

Employment Expenses 20 Salaries -Department Managers 21 Salaries - Owners 22 Salaries - Others 23 Absentee & Vacation Pay 24 Employee Benefits

Semi-Fixed Expenses 30 Office Supplies 31 Shop Tools - Sundry Supplies 32 Courtesy Vehicle 34 Laundry - Uniforms 35 Janitor Services - Cleaning 36 Postage 37 Policy Adjustments 38 Advertising 39 Donations 41 Company Vehicles 42 Inventory Maintenance - Vehicle Department 44 Data Processing 45 Training 46 Travel - Entertainment 47 Telephone - Fax 48 Membership Dues & Subscriptions 49 Freight - Express 50 Outside Services 51 Audit, Legal & Collection 52 Miscellaneous 53 Interest & Bank Charges 54 Floor Plan Interest

Fixed Expenses

Rent Factor 60 Rent And/or Mortgage Interest 61 Amortization Of Leasehold Improvements 62 Property Maintenance 63 Property Taxes 64 Building Insurance 65 Amortization of Building

Other Fixed Expenses 68 Business & Other Taxes 69 Amortization of Equipment & Fixtures 70 General Insurance 73 Maintenance Of Equipment 74 Heat, Light. Power & Water 75 Equipment Rental 80 Licenses (Company Only)

Adjustments 90 Marketing Allowance (for New Vehicles Sold) 91 Acura Concierge / AAFP Fund 99 Bonuses - Owners

Other Income 801 Cash Discount Earned 802 Interest Earned 804 Bad Debts Collected 806 Compensation Earned - Sales Tax 810 Miscellaneous

Other Deductions 853 Cash Discount Allowed 854 Bad Debt Expense 856 Directors' Fees 860 Miscellaneous


Revised January 2018 A-1

Chart of Accounts – Detail by Account

A- ASSETS



101 Petty Cash

Classification: Assets

Purpose: This account reflects a fund set up for the payment of small bills and provision for change for cash registers. It is recommended that items of $25.00 or over be paid by cheque. Every payment from this fund must be supported by a Petty Cash voucher stating the purpose of the payment shown and signed by the person receiving the money. Any invoices involved should be attached to the voucher.

The balance of the actual cash on hand plus the total voucher amount should always equal the original amount of this fund.

Whenever necessary, and always at month-end, diminishing cash may be replenished by issuing a cheque for the total of the vouchers, summarizing the vouchers on a Petty Cash Summary envelope.

Instructions:

Debit with: Credit with:

The amount originally set aside to establish the Petty Cash Fund

Any amount to increase the Petty Cash Fund

The amount which will reduce the Petty Cash Fund to a new level

The amount equal to the remaining balance if the Petty Cash Fund is eliminated

Comments: Each disbursement from the fund should be recorded and explained on a Petty Cash Voucher. The Petty Cash Voucher should indicate the department(s) to which the expense is charged (Please see additional comments in the Expense section). This serves also as a receipt from the person receiving the money. Each Petty Cash Voucher should be summarized on a Petty Cash Summary. A cheque should be issued reimbursing the fund as often as necessary and always at the month-end.

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102 Cash on Hand


Purpose: This account reflects all receipts from daily business transactions, which have been taken in but, not yet deposited in the bank. This does NOT include Petty Cash, cash deposits, NOR down payments for vehicles. Deposits on vehicles (depending on Provincial rules) may need to be recorded in Account 105, Trust Account.


Total of cash received from all sources

Bank deposits

Comments: A receipt should be prepared for all funds taken in during the course of each day's business. No cash disbursements should be made from this account. All cash received should be properly recorded in the cash receipts journal and deposited intact daily.



104 Bank Accounts


Purpose: This account reflects the amount on deposit and must be reconciled with the bank statement at month-end, taking into consideration all outstanding cheques, deposits and bank charges.

Instructions:


All amounts deposited in the bank

All withdrawals, by cheque or otherwise

Comments: If more than one bank is used, a separate ledger account should be established for each, following the same procedure for each bank.

The bank statement should be given, unopened, to the dealer principal for review prior to routing it to the accounting department. Any discrepancies should be resolved immediately.

*NOTE: A Credit balance reflects a liability, to be recorded as such on balance sheet.

A Debit balance reflects an asset, to be recorded as such on balance sheet.




105 Trust Account


Purpose: In certain provinces, there is a legal requirement to keep a separate account of all deposits made by customers on New and Used vehicle transactions. Even if not required by law, this procedure is recommended to protect these deposits from all contingencies.


Deposits made by customers on future deliveries of all New and Used vehicles.

Transfers to current bank account on delivery of vehicle or completion of obligation

Refund to customer if delivery of vehicle cannot be finalized

Comments: Because of the legal and tax implications related to customer deposits, professional tax and legal advice should be obtained regarding the proper usage of this account with regard to the laws of each respective province.




107 Finance Contracts in Transit


Purpose: The balance represents the amount due from finance institutions on customer finance contracts. A period of time may elapse between the forwarding of retail contracts to the finance company and receipt of the proceeds cheque. The total of all outstanding contracts should agree with the balance in this account at month-end.


The net amount (not including interest) of a customer finance contract submitted to a financial institution for payment to the dealership

The amount received from a financial institution on a customer finance contract

Comments: The activity in this account should be reviewed daily. A follow-up with the financial institution must be made if payment is not received promptly. Payments from the financial institutions must be verified to make sure that the amounts are correct. Any under or overpayment must be reconciled immediately. At month-end, a list of the notes for which payment has not been received should be prepared on a Monthly Analysis Sheet. This account must be reconciled at the end of each month.




108 Marketable Securities


Purpose: This account reflects investments by the dealership in Marketable Securities or bonds which may be quickly converted into cash within thirty (30) days.


The purchase price of securities

The selling or liquidation amount of securities

Comments: If the dealership has a surplus of cash, it may be prudent to invest these funds in liquid investments that may provide a higher yield than ordinary bank interest.

Interest or dividends will be credited to Interest Earned - Account 802.

Profits on the sale of securities should be credited to Miscellaneous Income - Account 810, and any losses should be debited to Miscellaneous Deductions - Account 860.




109 Cash Sales Clearing


Purpose: The balance represents cash receipts not yet deposited. Whenever practical, bank deposits should be made daily. This is a control account which should carry no balance at month-end.


Cash sales covering new vehicles (excluding customer deposits and down payments)

Cash sales covering used vehicles (excluding customer deposits and down payments)

Cash sales for customer repair orders prepared by the Service or Body Shop Departments

Cash sales for parts and accessories sold on counter tickets

The amount of cash received for depositing in the bank by the New Vehicle Department

The amount of cash received for depositing in the bank by the Used Vehicle Department

The amount of cash received for service or body shop labour completed (and parts sold) on customer repair orders

The amount of cash received for parts and accessories sold on counter tickets

Comments: No money should be paid out of the Cash Clearing account. Disbursements should be made by cheque or from the Petty Cash Fund. Cash receipts, regardless of the source, should pass through the hands of the cashier or person responsible for the cash so that they may be properly recorded and deposited intact.




110 Vehicle Licenses Clearing


Purpose: When the dealership is required to apply for a vehicle license to register a sold vehicle on the customer's behalf, the application may be submitted prior to the payment by the customer. The balance in this account reflects all license plates purchased (except Dealer plates - Expense Account 80) and permit transfers paid in advance.


The amount of all charges for license plates and transfers

All payments from customers received through the Vehicle Sales Journal for vehicle licenses

Comments: This is a control account to monitor the activity of vehicle licenses purchased on behalf of customers. The activity in this account should be reviewed at month-end. This account should be reconciled monthly. Outstanding amounts for licenses on delivered vehicles which have not been paid should be subject to collection procedures from the customer.



115 Accounts Receivable - Customer Service, Parts, Body

Shop


Purpose: The balance represents the unpaid balances of charges made to open accounts for Service, Parts and Body Shop sales. This is a control account and supporting details should be contained in a subsidiary ledger recording the status of all charge sales to customers.


The amount of sales charged on open account for Service, Parts ad Body Shop sales (includes open accounts for employees)

The amount of C.O.D. shipments of parts to customers

Customer cheques returned as uncollectible

Payments received which are to be applied to Service, Parts and Body Shop open accounts

Cash discounts offered for early payment of accounts

Credit memos issued to customers for Service, Parts or Body Shop adjustments

Write-offs of uncollectible ac-counts

Comments: Credit should only be extended to customers with a manager's approval. The manager authorizing the charge must be responsible for collecting payment. A subsidiary ledger should be set up for each open account. At the end of each month, all accounts should be aged and efforts must be made to collect the amounts due. Past due accounts should be reviewed by the dealer principal. After sixty (60) days, any amounts deemed, by the dealer principal, to be uncollectible should be set up as a "doubtful account" by crediting the past due amount to Account 125, Allowance for Doubtful Accounts and debiting Account 854, Bad Debt Expense. This complies with accounting procedures prescribed by most lending institutions for proper evaluation of Working Capital.

Subsequently, if a past due account is not paid, the dealer principal should direct the accounting staff to relieve the past due amount from this account by crediting this account and debiting Account 125, Allowance for Doubtful Accounts. Professional tax and



legal advice should be obtained regarding the proper procedures for writing off bad debts. Further, professional tax and legal advice should also be obtained regarding Provincial Sales Tax and/or G.S.T. that may have been included in the amounts in the doubtful accounts.



116 Accounts Receivable - Vehicles


Purpose: The balance of this account represents the amount due from customers for sales of vehicles on open account. It does NOT include amounts due on unpaid finance contracts. Unpaid finance contracts should be recorded in Account 107 - Finance Contracts in Transit.


The face value of promissory (one pay) notes from customers for vehicle sales (new or used)

The amount owed by customers on open account for vehicles purchased

Cheques returned by the bank as uncollectible for vehicles bought by customers

Payments (excluding interest) received for vehicle accounts

Unpaid balance of an account when the vehicle is repossessed from the customer

Write–offs of uncollectible amounts

Comments: Occasionally, customers will take delivery of vehicles pending funding of approved car loans from the customer's own bank, credit union or other private financing source. When this is the case, the down payment should be collected before delivery and a promissory note should be signed by the customer. This account is a control account which is used to keep track of money owed to the dealership for the purchase of new or used vehicles. Any outstanding amounts should be collected on or before the agreed upon date.

Payments received should be recorded immediately and deposited in the bank on a daily basis. Timeliness of balancing this account is vital.



117 Accounts Receivable - Factory


Purpose: The balance of this account represents the amount due to the dealership from Honda Canada Inc. This is a control account and supporting details should be contained in a subsidiary ledger recording charges to Honda Canada Inc.


The amount of all charges which have been billed to Honda Canada Inc.

• Program Payments

• Fleet Trading Assistance

• Service Co-op

• Wholesale Assistance

• Transportation Claims

• No Charge Maintenance Programs

The amount of other charges billed

Payments received or adjustments made by Honda Canada Inc.

Comments: In order to facilitate record keeping, it may be convenient to establish sub-accounts for each of the categories shown above.

This account should be reconciled at month-end and any discrepancies should be resolved immediately.



119 Lease Receivables


Purpose: The balance of this account represents the amounts due to the dealership for vehicle leases. This is control account and supporting details should be contained in a subsidiary ledger recording the status of all amounts due on lease transactions.


Amount due on vehicle leases

Payments received

Comments: A subsidiary ledger should be set up for each lease. At month-end, all accounts should be reconciled. Collection efforts must be made to receive any outstanding amounts.



120 Warranty Claims


Purpose: The balance of this account represents the amount due from Honda Canada Inc. for warranty service performed by the dealership at the agreed rates and on the conditions set out in the warranty procedure manual.


The amount allowed by Honda Canada Inc. for warranty work performed on customer vehicles still under the manufacturer’s warranty

The amount received as credit or cash in payment of Warranty Claims

Comments: Each claim should be recorded in the Warranty Claims Register.

A month-end schedule should be prepared on a Monthly Analysis Sheet showing the amount of each unpaid claim. Any difference between the total of this schedule and the account balance should be reconciled and adjusted through Account 05, Policy Inspection or Account 37, Policy Adjustments - Parts & Services. If there is an error in billing, then consideration should be made to adjusting the applicable warranty sales account.

Claims which are denied payment in its entirety should be investigated to determine the reason of ineligibility for payment. After determination is made that the claim cannot be paid, it should be written off by debiting Account 37, Policy Adjustments - Parts & Services.

Past due amounts must be shown in the designated place on the Financial Statement.



121 Marketing Allowance Receivable


Purpose: As a matter of policy, Honda Canada Inc. (HCI) will return a portion of each new vehicle invoice amount to assist the dealers to sell new vehicles. This amount is called the Marketing Allowance or Marketing Support and HCI reserves the right to adjust the amount from time to time. The balance represents the amount of Marketing Allowance due to the dealership as a result of new vehicles purchased from HCI.


The amount of Marketing Allowance or Marketing Support receivable on each new vehicle purchased

The amount of payment received from HCI for Marketing Allowance or Marketing Support

Example 1: Record the purchase of a new vehicle directly from HCI, which has an invoice of $20,000 (including freight, air tax, advertising and Dealer Council), a Marketing Allowance of $300, Wholesale Assistance of $35 and a G.S.T. charge of $1,400.

Journal: New Vehicle Purchase Journal

Account Account Description Debit Credit

121 Marketing Allowance Receivable $300

230 Deferred Marketing Allowance $300

117 Accounts Receivable - Factory (Wholesale Assistance)

$35

1254 Floor Plan Interest $35

130 New Vehicles (Inventory) $20,000

219A Goods and Services Tax (Input Credit)

$1,400

205 Loans on New Vehicles (Floor plan)

$21,400

Example 2: Record the sale of the new vehicle above for $21,000, the G.S.T. is $1,470, the Provincial Sales Tax is $1,680, and the Vehicle License is $100. There is no trade and the customer has previously paid $6,000 as a cash down payment and finances $18,150. The Finance reserve is $350.





304 New Vehicle (Sales) $21,000

404 New Vehicle (Cost of Sales) $20,000


1238 Advertising (New Vehicles) $150

404 New Vehicle (Cost of Sales) $150

230 Deferred Marketing Allowance (reversal of Marketing Allowance credit)

$300

90 Marketing Allowance on New Vehicles Sold

$300

219B Goods and Services Tax (Payable)

$1,470

220 Provincial Sales Tax $1,680

109 Cash Sales Clearing $100

110 Vehicle Licenses Clearing $100

222 Customer Deposits $6,000

107 Finance Contracts in Transit $18,150

701 Contract Reserves-New $350

123 Finance and Insurance Commissions (Receivable)

$350

Comments: This account is established to record the Marketing Allowance or Marketing Support only.

As each new vehicle is received from H.C.I. and placed into the dealership's inventory, the Marketing Allowance amount is debited to Account 121, Marketing Allowance Receivable

(Note: The Advertising charges are debited to Account 1238, Advertising, at the time the vehicle is sold).

When the Marketing Allowance "payment" is received (via credit to the Parts statement) from HCI, the amount is credited to Account 121, Marketing Allowance Receivable (to relieve the account), Account 219B, Goods and Services Tax (payable), is credited and the sum debited to Account 218, Factory Payable.



122 Goods and Services Tax Receivable


Purpose: The balance represents the Goods and Services Tax refunds owed to the dealership for any month in which the Input Tax Credits exceed the liability.


The amount of G.S.T. to be recovered from a prior month

The amount of G.S.T. refunds received

Example 1: When reviewing the month-end trial balance, it is determined that a debit balance of $4,000 exists (G.S.T. due to the dealership as a refund). Record the G.S.T. Receivable which is transferred from Account 219A, Goods and Services Tax (Input Tax Credit), where the balance is $225,000 and Account 219B, Goods and Services Tax (Payable) with a balance of $221,000.

Journal: General Journal


122 G.S.T. Receivable $4,000


$221,000

219A Goods and Services Tax (Input Tax Credit)

$225,000

Note: This entry should be processed prior to preparing the monthly financial statement.

Example 2: Record the receipt of the G.S.T. refund cheque of $4,000.

Journal: Cash Receipts Journal



104 Bank Accounts $4,000

Comments: In most cases, the amount of G.S.T. payable (see Account 219B, Goods and Services Tax (Payable)) will be more than the G.S.T. (Input Tax Credit). However, if a refund is due to the dealership, the amount of the refund is credited to Account 219A, Goods and Services



Tax (Input Tax Credit) and debited to Account 122, G.S.T. Receivable.

As G.S.T. refunds are received and reconciled at the dealership, the amount of the refund cheque is credited to Account 122, G.S.T. Receivable (to relieve the account) and debited to Account 104, Bank Accounts as the deposit is made.

Any interest received on the G.S.T. refund is recorded in Account 802, Interest Earned.

A properly completed G.S.T. Return must be prepared and filed before the deadline in order to avoid penalties and interest.



123 Finance and Insurance Commissions


Purpose: The balance of this account represents the outstanding amounts of funds owed to the dealership by financial institutions and insurance companies. This is a control account and supporting details should be contained in a subsidiary ledger recording the amount of all F&I Commissions receivable.


The amount of commissions due

The amount of payments received

Comments: Each bank and insurance company should be recorded in a subsidiary ledger. A review of outstanding amounts due to the dealership should be conducted at month-end and reconciled. All over and underpayments should be followed up on a timely basis. If a pattern of discrepancies emerges, steps need to be taken to ensure that proper F & I receivables are setup when processing the transaction. Caution needs to be exercised when short payments are received. Collection efforts must be initiated regarding any amounts that have not been paid.




125 Allowance for Doubtful Accounts


Purpose: The balance of this account reflects a reserve for potential losses incurred due to the possible non collection of customers' accounts. Even though this account is classified as an Asset, it is a contra account (i.e. credit balance).


The amounts recovered for receivables previously allowed for as uncollectible

The amount of monthly adjustment to decrease the balance of the account

The amount of all receivables classified as Bad Debts and for which a provision should be set up

The amount of the monthly adjustment to increase the balance of the account

Comments: Professional tax and accounting advice should be obtained regarding the proper handling of Bad Debts and the subsequent write off. When Bad Debts are written off, they should be removed from the subsidiary ledger and retained in a Bad Debts file. Even after an account has been written off, collection efforts should continue.

As Bad Debts are provided for, the amount is credited to this account. The offsetting debit is posted to Account 854, Bad Debt Expense.

This account should be reconciled with the Accounts Receivable subsidiary ledgers.




130 New Vehicles


Purpose: This account reflects the value of New Vehicles on hand including the invoice cost (including advertising association and SYST / MKTG Support fees) and cost of dealer-installed equipment. Each vehicle's particular record should be carried in the inventory (Washout) Record.


The inventory cost of New Vehicles received directly from Honda Canada Inc. (HCI)

The price of a New Vehicle received as a trade from another Acura dealer

The cost of parts and labour for accessories installed on the vehicles

The inventory value of New Vehicles sold to end users or traded to another Acura dealer

The inventory value of New Vehicles transferred to demonstrator service, lease or rental vehicle inventory, driver training inventory, company vehicle service, or courtesy vehicle service

The cost of accessories removed from New Vehicles while still in inventory

Recommended Procedure

Example 1: Record the purchase of a new vehicle directly from HCI, which has an invoice of $20,000 (including freight, air tax, advertising and Dealer Council), a Marketing Allowance of $300, Wholesale Assistance of $35 and a G.S.T. charge of $1,400.








$35




$1,400


$21,400

Example 2: Record the sale of the new vehicle above for $21,000, the G.S.T. is $1,470, the Provincial Sales Tax is $1,680, and the Vehicle License is $100. There is no trade and the customer has previously paid $6,000 as a cash down payment and finances $18,150. The Finance reserve is $350.




404 New Vehicle (Cost of Sales) $20,000



404 New Vehicle (Cost of Sales) $150


$300


$300


$1,470





107 Finance Contracts in Transit $18,150



$350

Comments: New vehicle purchases should be posted to this account as soon as they are received.



The amount of the Marketing Allowance should be identified and debited to Account 121, Marketing Allowance Receivable. The offsetting credit is posted to Account 230, Deferred Marketing Allowance.

When the vehicle is sold, the respective amount of the Marketing Allowance is debited - reversing the credit above and relieving the account. The offsetting credit is applied to Account 90, Marketing Allowance for New Vehicles Sold.

The amount of Advertising Association Fees should be kept with the inventory value of the vehicle until the vehicle is sold. At the time of sale, the Advertising Association fees should be identified and debited to Account 38, Advertising (New Vehicle Department). This preserves the "timing and matching" of the advertising expense with the sale of the vehicle and provides a better framework for analysing the performance of the New Vehicle Department.

Vehicles that are placed in demonstrator service, leased to customers, out in rental car service, loaned to driver training schools, or used as company vehicles should be removed from the New Vehicle inventory and posted to the proper account.



136 Demonstrators


Purpose: The balance represents the cost of new Acura vehicles set aside for use as Demonstrators. This account reflects all Demonstrators transferred from the New Vehicle inventory accounts.


The inventory value of the new vehicle placed in demonstrator service

Parts and labour for dealer installed accessories added to Demonstrators

The inventory value of Demonstrators removed from demonstrator service

The cost of “take off” equipment or accessories removed from a demonstrator while the vehicle is still in service (e.g. Ski rack)

Example 1: Record the transfer of a new vehicle placed in demonstrator service. The vehicle has an inventory value (formerly in Account 130, New Vehicles) of $20,000.



136 Demonstrators $20,000


Example 2: Record the installation of an engine block heater on the demonstrator above. The Internal Parts sale is $125, with an inventory cost value of $100. The labour to install the block heater is $80 and the compensation paid to the technician is $20. The total transaction is $205.



Journal: Internal Sales or Service Sales Journal


136 Demonstrators (Inventory) $205

358 Parts Internal (Sales) $125

458 Parts Internal (Cost of Sales) $100

144 Parts & Accessories - Acura (Inventory)

$100

374 Labour - Internal, Service (Sales)

$80

474 Labour - Internal, Service (Cost of Sales)

$20

150 Labour in Process (Inventory) $20

Comments: When a new unit is placed in demonstrator service, a notation should be made on the Vehicle Inventory Record. Dealer installed accessories are debited to this account.

Demonstrators should be maintained according to the Honda Canada Inc. recommended service schedule. The cost of routine maintenance is expensed by debiting Account 41, Company Vehicles.

Note: Please consult your accounting and tax professional(s) regarding the applicable provincial or local usage taxes, which are assessed on Demonstrators in Inventory.



138 Used Vehicles


Purpose: The balance of this account reflects the inventory value of all Used Vehicles purchased or accepted as trade-ins. The recommended inventory value is the Actual Cash Value (ACV) or "wholesale price."


The purchase price of Used Vehicles acquired as trade-ins, at auctions, from wholesalers or purchased directly from an owner

The amount of reconditioning costs (including safety checks, emission tests, and dealer installed accessories) performed on Used Vehicles while in inventory

Expenses incurred to acquire a Used Vehicle including auction fees, buyer’s fees, travel & transportation expenses and other miscellaneous expenses

The inventory value of Used Vehicles when sold at retail or wholesale

The inventory value of Used Vehicles which are transferred to company vehicle service, scrapped, junked, or disposed of through normal business transactions

The amount of any month-end inventory adjustment (“write-down”)

Comments: An inventory schedule should be prepared at the end of each month and reconciled with a physical inventory. Discrepancies should be reconciled immediately. Each Used Vehicle should be aged and compared to current market value. Adjustments to the value should be credited to this account.




139 Courtesy Vehicles – Inventory


Purpose: The balance of this account represents the value of vehicles set aside as Courtesy Vehicles for service and parts customers. An established time and kilometre schedule must be adhered to regarding disposal and replacement of vehicles.


Inventory value of vehicles when placed in service

Parts and labour for dealer installed accessories added to Courtesy Vehicles

The value of each unit upon sale or transfer

The monthly amortization applied to Courtesy Vehicles while in service

Example 1: Record the transfer of a car to the Courtesy Vehicle Inventory to be used as a loaner car for service and parts customers. The inventory value is $20,000.



139 Courtesy Vehicles - Inventory $20,000


Example 2: Record the installation of splash guards installed on the Courtesy Vehicle above. An internal repair order is prepared for a total sale of $180. The internal sales price of the splash guards is $105 with an inventory value of $60. The internal labour is $75, of which $25 is paid to the technician.



Journal: Internal Service Sales Journal


139 Courtesy Vehicles - Inventory $180

358 Parts - Internal (Sales) $105

458 Parts - Internal (Cost of Sales) $60

144 Parts and Accessories (Inventory) $60

374 Labour - Internal, Service (Sales) $75


$25

150 Labour In Process (Inventory) $25

Example 3: The Courtesy Vehicle above is amortized at the rate of $250 per month. Record the monthly amortization.




1432 Courtesy Vehicle (Parts) $125

1532 Courtesy Vehicle (Service) $125

Example 4: At a designated time based on length of service, mileage, or model year, the vehicle above, which had an original inventory value of $20,180 ($20,000 + $180) retired from Courtesy Vehicle Service and transferred to the Used Vehicle Inventory. A total of $2,000 covering an eight (8) month period had been amortized as a Courtesy Delivery Expense resulting in an adjusted inventory value of $18,180. The current market value is $17,000. Therefore, an additional $1,180 must be amortized at the time of transfer. The final amortization is divided evenly between Parts and Service.




138 Used Vehicles (Inventory) $17,000



Comments: This is intended to be a controlled account (controlled by the VIN or Stock Number).

An inventory schedule for Courtesy Vehicles should be prepared and updated as necessary. At month-end, the schedule should be reconciled with a physical inventory



of the vehicles. Discrepancies should be reconciled immediately.

Dealer installed accessories are debited to this account.

Courtesy Vehicles should be maintained according to the Honda Canada Inc recommended service schedule. The cost of maintenance should be expensed by debiting Account 32, Courtesy Vehicle.

When a Courtesy Vehicle is removed from service, it should be transferred to Account 138, Used Vehicles at current market appraised value (ACV - Actual Cash Value) and adjustments should be debited or credited to Account 32, Courtesy Vehicle.

Note: Please consult your accounting and tax professional(s) regarding the applicable provincial or local usage taxes, which are assessed on Courtesy Vehicle Inventory.



140 Daily Rental Vehicles


Purpose: The balance of this account represents the inventory value of vehicles placed in the dealership's Daily Rental fleet for customers (other than specially designated Service Rental Vehicles). A time and kilometre schedule must be observed for the sale and replacement of vehicles.


Inventory value of vehicles when placed in service

The value of each unit upon sale or transfer

Comments: An inventory schedule for Daily Rental Vehicles should be prepared and updated as necessary. At month-end, the schedule should be reconciled with a physical inventory of the vehicles. Discrepancies should be reconciled immediately.


Service Rental Vehicles should be maintained according to the Honda Canada Inc. recommended service schedule. The cost of maintenance should be expensed by debiting Account 41, Company Vehicles

When a Daily Rental Vehicle is removed from service, it should be transferred to Account 138, Used Vehicles at current market appraised value (ACV - Actual Cash Value).



141 Other Inventories


Purpose: Accounts 141 is established to record non-automotive, miscellaneous inventories of goods that are intended for retail sale to end users. This account is maintained for Other Inventories not recorded elsewhere in the Chart of Accounts.


The inventory value of items such as farm tractors, snow mobiles, appliances, electronic devices, jewellery, and other goods of value that are taken in via trade or otherwise acquired by the dealership for resale

The inventory value of miscellaneous merchandise sold or liquidated

Comments: Occasionally it is necessary for automobile dealerships to consider non-automotive goods as trade-ins on vehicle transactions. Careful appraisals must be made - it is advisable to consult experts in their respective fields. Other Inventories should be treated in the same way as vehicles and parts. Stock numbers should be assigned. Inventory schedules should be prepared at month-end and reconciled with a physical inventory.



142 Parts – Acura


Purpose: The balance of this account reflects the net cost price of all Acura Parts on hand.


The cost of Acura Parts purchased

An increase in book value of the Acura Parts on hand as a result of a reconciliation with a physical inventory

The cost of Acura Parts sold

A decrease in book value of the Acura Parts in hand as a result of a reconciliation with a physical inventory

The amount of a write-off for obsolete, and scrapped Acura parts which are removed from inventory

The amount of Acura Parts that are donated to schools

Comments: In support of this account, a perpetual inventory control system must be maintained. At least once per year, a physical count should be compared with the inventory control and general ledger. DO NOT include Parts Discount in the "dealer" net cost calculation. (Refer to Account 463, Parts Discount Earned).

When Parts Updates are received from Honda Canada Inc., the new pricing structure may have the effect of increasing or decreasing the value of the Honda Parts inventory on hand. Adjustments to the inventory value should be made through Account 464, Parts Inventory Adjustment.

The dealer principal should establish a policy for handling obsolete Parts and disposing of these as scrap Parts.



144 Accessories – Acura


Purpose: The balance of this account reflects the net cost price of all Acura Parts and Accessories on hand.


The cost of Acura Accessories purchased

An increase in book value of the Acura Accessories on hand as a result of a reconciliation with a physical inventory

The cost of Acura Accessories sold

A decrease in book value of the Acura Accessories in hand as a result of a reconciliation with a physical inventory

The amount of a write-off for obsolete, and scrapped parts which are removed from inventory

The amount of Acura Accessories that are donated to schools


When Parts Updates are received from Honda Canada Inc., the new pricing structure may have the effect of increasing or decreasing the value of the Acura Accessories inventory on hand. Adjustments to the inventory value should be made through Account 464, Parts Inventory Adjustment.




145 Parts – Other


Purpose: This account is established as an auxiliary inventory for the Parts and Accessories department. It is to be used only for Parts inventories that are non-Acura.


The cost of non-Acura Parts purchased

An increase in book value of the non-Acura Parts on hand as a result of a reconciliation with a physical inventory

The cost of non-Acura Parts sold

A decrease in book value of the non-Acura Parts on hand as a result of a reconciliation with a physical inventory






146 Accessories - Other


Purpose: This account is established as an auxiliary inventory for the Parts and Accessories department. It is to be used only for Accessories inventories that are non-Acura.


The cost of non-Acura Accessories purchased

An increase in book value of the non-Acura Accessories on hand as a result of a reconciliation with a physical inventory

The cost of non-Acura Accessories sold

A decrease in book value of the non-Acura Accessories on hand as a result of a reconciliation with a physical inventory








148 Tires


Purpose: The balance of this account represents the acquisition cost of all Tires in inventory.


Net cost price of Tires

Net cost of Tires sold to customers

Net cost of Tires sold on Internal Repair orders





149 Sublet Repairs


Purpose: This account is established to record the cost of work performed by an outside vendor and sold through the Service Department. At each month-end, the balance represents the Sublet Repairs purchased, but not yet paid by customers.


The cost of a sublet labour and materials purchased from an outside vendor to be resold to a customer by the Service Department

The cost of sublet labour and materials sold

Comments: When Sublet Repair work is contracted with outside vendors, it should be considered as inventory with the same concept as vehicles and parts. Purchase orders should be prepared prior to having any work performed. The P. O. should describe the work to be done, the maximum cost, the stock number, VIN, or R. O.# and a manager's approval. Upon completion of repair work and receipt of an invoice, the charge must be recorded on a repair order and cross-referenced with the P.O. The manager authorizing the P.O. should be responsible for preparing a schedule of outstanding Sublet Repairs at month-end. The accounting office must review the schedule and make adjusting entries as necessary.



150 Labour in Process


Purpose: The balance of this account represents the labour costs of uncompleted repair orders or completed orders not booked in the sales journal by month end.


The compensation paid or payable to service and body shop technicians (productive personnel) for labour only (does not include vacation, holiday, sick leave, training or

other pay) {See Account 225, Accrued Payroll and Account 226, Accrued Vacation Pay}

An adjustment to increase the Work in Process – Labour when the amount of open repair orders is greater than the General Ledger account balance

The cost of labour sold on completed repair orders

An adjustment to decrease to the Work in Process – Labour when the amount of open repair orders is less than the General Ledger account balance

Comments: A schedule of incomplete repair orders should be prepared on a Monthly Analysis Sheet at month-end. This account should be adjusted to agree with the schedule of the cost of labour on uncompleted repair orders through Account 480, Unapplied Time – Service.



151 Gasoline (fuel), Oil and Grease


Purpose: The balance of this account represents the inventory value of Gasoline (fuel), Oil and Grease.


Cost of all Gasoline (fuel), Oil and grease purchased

Any increase in book value due to an adjustment resulting from a physical inventory

The cost of sales of Gasoline (fuel), Oil and Grease sold or used within the dealership

Any decrease in book value due to an adjustment resulting from a physical inventory

Comments: A physical inventory of Gasoline (fuel), Oil and Grease should be taken at each month-end. Since the exact measure of these quantities (especially grease) is difficult and also since losses can be expected due to evaporation and spillage, the physical inventory should be satisfied by making a best estimate. Sales should be cost individually whenever possible; however using standard quantities for specific repairs is acceptable. Because of these factors, adjustments to this account at month-end are a normal expectation.

To minimize losses, the dispensing of gasoline (fuel) should be controlled. The pump should be locked when not in use. Only one employee should be given responsibility for recording the fill-ups and the amount of gasoline used.



152 Paint and Body Shop Supplies


Purpose: The balance of this account represents the inventory value of Paint and Body Shop materials and supplies.


The value of Paint and Body Shop materials purchased

Any increase in book value as a result of a reconciliation with a physical inventory

The cost of Paint and Body Shop materials sold or consumed during the course of body shop repairs

Any decrease in inventory value as a result of a discrepancy detected during a physical inventory

Comments: The Parts Department should maintain the control of Paint and Body Shop Supplies. All purchased Body and Paint supplies should be posted to this inventory account. This ensures tighter control towards the reduction of losses and wasted materials.

Since Paint and Body Shop materials do not facilitate exact costing due to partial cans of paint being left over from a particular repair and other similar circumstances, it is important to take a physical inventory at each month-end. A reconciliation should be made between the balance of this account and the actual value of supplies on hand. Off-setting adjustments are made to Cost of Sales Account 485, Supplies - Body & Paint.



154 Prepaid Rent


Purpose: The balance represents the amount paid to a landlord for future months’ consideration.


The amount of deposit tendered to the landlord to secure a lease

The amount of monthly rent paid in advance (e.g. first and last month rent)

Write off Prepaid Rent to current month’s expense

Comments: Since the Prepaid Rent normally consists of a security deposit and/or the last month's rent, the amount of prepayment is likely to remain the same for the life of the lease.




155 Prepaid Taxes


Purpose: The balance of this account represents the amount of taxes (excluding income tax) paid in advance for future time periods.


The amount of taxes paid which are to be applied to periods beyond the current month

• Real Estate Property Taxes

• Inventory Taxes

• Equipment Taxes

• Other Taxes

The monthly write off of the portion of Prepaid Taxes which applies to the current month’s business activities

Comments: Professional tax and accounting advice should be obtained regarding the proper handling of tax payments. This account reflects business and property taxes paid in advance (for Prepaid Income Tax use Account 233, Prepaid Income Tax). The total amount of the Tax Prepayment should be pro-rated over the number of months for which the Tax is assessed. The pro-rated monthly provision of the Tax should be written off each month by crediting this account with the monthly provision and debiting Account 63, Property Taxes or Account 68, Business & Other Taxes, whichever applies.



156 Prepaid Insurance


Purpose: The balance represents the amount paid in premiums covering the remainder of the policy term.


The amount of insurance premiums paid

The write off of Prepaid Insurance to current month’s expense

Comments: Most insurance policies require advance payment of premiums in order to keep the policy in force. When the premium payment is made, the amount of the premium is debited to this account and a prepaid and accrued insurance schedule should be prepared. The premium should be pro-rated over the term of the policy. Each month, the pro-rated monthly provision should be credited to this account. The offsetting debit is posted to either Account 24, Employee Benefits, Account 64, Building Insurance or Account 70, General insurance, whichever applies. For convenience, individual sub-accounts may be established for different forms of insurance, i.e. general, building, Workmen's Compensation/Workplace Safety and Insurance Board, etc.



157 Other Prepaid Expenses


Purpose: The balances represent the unexpired portion of expenses paid.


The amount of prepaid funds for transactions that are intended for future use

• Bulk supply of forms such as repair orders, counter tickets, letterhead, etc.

• Bulk purchase of office sup-plies

• Bulk purchase of heating oil or other fuel

• Retainers paid to vendors such as accountants, attorneys, or other professionals

• Advance payment to vendors for outside services such as landscaping, snow removal, etc.

• Prepayment of Service Contracts covering dealership equipment (photocopiers, computers, etc.)

The write off of prepaid amounts to current month’s expense

Comments: This account is established for all Other Prepaid Expenses (other than Prepaid Rent, Prepaid Taxes, or Prepaid Insurance). Separate general ledger sub-accounts may be established for each type of expense included in these accounts. These accounts should be combined and shown in total on the financial statement. A detailed schedule should be prepared for each item. The full amount of each expense should be pro-rated over the term for which the expense applies. The monthly pro-rated provision should be credited to this account. The off-setting debit should be posted to the corresponding Expense account.



165 Land


Purpose: The balance of this account represents the cost of Land owned by the dealership, including surveys, legal and contingent expenses encountered in securing ownership.


The cost of Land purchased for automobile business usage

The cost of fees and expenses related to the purchase of land

• Legal Fees

• Abstract and Title Fees

• Surveys

• Title Fees

• Recording Fees

• Land Transfer Tax

Total cost of Land sold

Comments: Only assets used in the operation of the automobile business should be included in this account. Each item in this account should be detailed in the account or a suitable subsidiary record showing:

• Date of acquisition

• Acquired from

• Description

• Cost

Professional tax and accounting advice should be obtained regarding the proper capitalization of Land and the various related fees and expenses.




167 Buildings


Purpose: The balance represents the cost of Buildings and improvements situated on land owned by the dealership.


The cost of Building(s) constructed or purchased for use in the automobile business

The cost of improvements, additions, remodelling, and permanent fixtures attached to the Building(s)

The cost of architectural fees, legal fees, or other fees related to the improvements

The cost of Building(s) and improvements when sold or liquidated

Comments: Only assets used in the operation of the automobile business should be included in this account. Each item in this account should be detailed in the account or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost




168 Accumulated Amortization - Buildings


Purpose: The balance of this account represents the total Accumulated Amortization applied to buildings owned by the dealership for usage in the automobile business.


Amount of accumulated amortization when sold or liquidated

The monthly amount of amortization of buildings and improvements

Comments: Professional tax and accounting advice should be obtained in order to properly establish the correct amortization rate and schedule. As indicated above, the monthly amortization is credited to this account and the off-setting debit is posted to Expense Account, 65, Building Amortization.



1690 EDP Equipment


Purpose: The balance of this account represents the installed cost of Electronic Data Processing Equipment (including computer hardware and software, but not consumables).


Total cost of EDP Equipment - Hardware (including installation and initial outside programming costs)

Total cost of Software acquired

The cost of EDP Equipment upon sale, liquidation or disposal

Comments: EDP Equipment should be capitalized at the purchase price. Each item of EDP Equipment should be detailed in the account or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost

Hardware and Software should be setup in separate sub-accounts to facilitate differences in amortization rates and/or capital cost allowances allowed for each category.



1691 Accumulated Amortization - EDP Equipment


Purpose: The balance of this account represents the total Accumulated Amortization of EDP Equipment.


Amount of accumulated amortization upon sale, liquidation or disposal

The monthly amount of amortization

Comments: Professional tax and accounting advice should be obtained in order to properly establish the correct amortization rate and schedule. Since hardware and software have different amortization rates, it is advisable to set up each in separate subsidiary records. As indicated above, the monthly amortization is credited to this account, and the off-setting debit is posted to Expense Account 69, Amortization - Equipment & Fixtures.



170 Building Fixtures


Purpose: The balance of this account represents the cost of fixtures and equipment constructed or added to the dealership building(s).


Actual purchase cost of fixtures and any improvements and additions

The cost of Building Fixtures upon sale, liquidation or disposal

Comments: Permanent fixtures such as air conditioning, heating, lighting, and decorative items should be capitalized as building fixtures. Professional tax and accounting advice should be obtained regarding the proper classification of Property, Plant and Equipment. Each item should be detailed in the account or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost



171 Accumulated Amortization - Building Fixtures


Purpose: The balance of this account represents the total Accumulated Amortization of Building Fixtures.


The total accumulated amortization upon sale, liquidation or disposal of the asset

The monthly amortization of Building Fixtures

Comments: Professional tax and accounting advice should be obtained in order to establish the correct amortization rate and schedule. The monthly amortization is credited to this account and the off-setting debit is posted to Expense Account 69, Amortization - Equipment & Fixtures.



172 Leasehold Improvements


Purpose: This balance represents the cost of Leaseholds and Improvements on leased land. This account reflects costs absorbed by the tenant (not the owner) regarding improvements and modifications made to leased premises.


The purchase price of a lease

The cost of improvements to leased property

The cost of existing improvements acquired with leased property

Any premium amount paid to acquire a lease

The cost of Leaseholds and/or Improvements when the lease is terminated or sold

Comments: Only assets used in the operation of the automobile business should be included in this account. Each item of Leasehold Improvements should be detailed in the account or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost



173 Accumulated Amortization - Leasehold Improvements


Purpose: The balance of this account represents the total Accumulated Amortization of Leasehold Improvements.


Accumulated amortization upon termination of lease

The monthly Amortization of Leasehold Improvements

Comments: Professional tax and accounting advice should be obtained regarding the proper establishment of amortization rates and schedules for Leasehold Improvements. The monthly amount of amortization is credited to this account and the off-setting debit is posted to Expense Account 61, Amortization of Leasehold Improvements.




174 Office Equipment


Purpose: The balance of this account represents the acquisition cost of permanent Office Equipment and furniture used by the dealership. This account should not contain consumable office supplies.


Actual purchase cost of all permanent office furniture and equipment

• Desks & Chairs

• File Cabinets

• Office Machines

• Telephone Equipment

• Safes

• Tables

• Moveable Office Partitions

The cost of Office Equipment upon disposal (sale or liquidation)

Comments: Professional tax and accounting advice should be obtained regarding the proper categorization of these Office Equipment assets. A policy should be set for capitalization of these assets as opposed to purchases that may properly be expensed. Each item should be detailed in the account or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost




175 Accumulated Amortization - Office Equipment


Purpose: The balance of this account represents the total Accumulated Amortization applied to Office Equipment.


Amount of accumulated amortization of Office Equipment upon sale, liquidation or disposal

The monthly amortization amount of Office Equipment

Comments: Professional tax and accounting advice should be obtained in order to properly establish the amortization rates and schedules for Office Equipment. The monthly amortization is credited to this account and the off-setting debit is posted to Expense Account 69, Amortization - Equipment & Fixtures.



176 Parts Department Equipment


Purpose: The balance represents the cost of permanent equipment (bins and racks, etc.) acquired or built for use in the parts and accessories department.


The cost of Parts & Accessories Equipment

• Parts Bins & Racks

• Parts Cabinets & Containers

• Show Cases & Counters

• Micro Film Equipment

• Electronic Parts Catalogue Hardware

The cost of Parts & Accessories Equipment that is sold, donated, liquidated or disposed

Comments: Only assets used in the operation of the automobile business should be included in this account.

Each item of Parts Department Equipment should be detailed in the account or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost

• Freight



177 Accumulated Amortization - Parts Department Equipment


Purpose: The balance of this account represents the total Accumulated Amortization applied to equipment for the Parts Department.


Amount of accumulated amortization of Parts Department Equipment upon sale, liquidation or disposal

The monthly amortization amount for Parts Department Equipment

Comments: Professional tax and accounting advice should be obtained regarding the proper establishment of amortization rates and schedules for Parts Department Equipment. The monthly amortization is credited to this account and the off-setting debit is posted to Expense Account 69, Amortization Equipment & Fixtures.




178 Service Department Equipment


Purpose: The balance of this account represents the cost value, installation charges included, of machinery, tools and equipment used in the Service Department.


The cost of equipment and tools, including installation

• Diagnostic Test Equipment

• Hoists

• Lube Equipment

• Work Benches

• Cabinets

• Shelves

• Tool Racks

Cost of equipment upon disposal

Comments: Only assets used in the operation of the automobile business should be included in this account. A policy should be set for capitalization of these assets as opposed to purchases that may properly be expensed.

Each item of Service Department Equipment should be detailed in the account or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost

• Freight



179 Accumulated Amortization - Service Department

Equipment


Purpose: The balance of this account represents the total Accumulated Amortization applied to Service Department Equipment.


The total amount of accumulated amortization of Service Department Equipment upon disposal

The monthly amortization amount applied to Service Department Equipment

Comments: Professional tax and accounting advice should be obtained regarding the amortization of Service Department Equipment in order to establish the proper rates and schedules. The monthly amortization is credited to this account and the off-setting debit is posted to Expense Account 69, Amortization - Equipment & Fixtures.



181 Signs


Purpose: The balance of this account represents the purchase price of Signs, including installation charges.


The installed cost of Signs

The cost of Signs sold or otherwise disposed of

Comments: All signs acquired by the dealership should be capitalized in this account as Signs. A policy should be set for capitalization of these assets as opposed to purchases that may properly be expensed. Each item should be detailed in the account or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost

• Freight

• Installation Charge



182 Accumulated Amortization - Signs


Purpose: The balance of this account represents the total Accumulated Amortization applied to signs owned by the dealership.


Amount of accumulated amortization of signs upon liquidation or disposal

The amortization amount applied to signs

Comments: Professional tax and accounting advice should be obtained to establish the proper amortization rates and schedules for signs. The monthly amortization is credited to this account and the off-setting debit is posted to Expense Account 69, Amortization - Equipment & Fixtures.



183 Company Vehicles


Purpose: The balance of this account represents the cost of new and used units set aside for permanent company use including the cost of any extra equipment and accessories. Demonstrators are NOT included in this account.


The cost of Company Vehicles placed in service

Parts Delivery Truck

Service Tow Truck

Courtesy Vehicles

The cost of dealer installed accessories to Company Vehicles

The cost of a Company Vehicle when it is sold

Comments: Each vehicle listed in this account should be detailed in a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost

Cost of assets should include additional items, such as:

• Freight

• Accessories

• Optional equipment

Professional tax and accounting advice should be obtained regarding the proper amortization rate and schedule for each vehicle.

A physical inventory should be taken at the end of each month. Discrepancies (missing vehicles) should be reconciled immediately.


Company Vehicles should be maintained according to the manufacturer's recommended service schedule. The



cost of maintenance should be expensed by debiting Account 41, Company Vehicles.

When a company vehicle is retired from service it must be transferred to Account 138, Used Vehicles. Such units should be transferred at the lower of book or appraised wholesale values. Charge any differences to Expense Account 41, Company Vehicles.

Note: Please consult your accounting and tax professional(s) regarding the applicable provincial or local usage taxes, which are assessed on company vehicles.



184 Accumulated Amortization - Company Vehicles


Purpose: The balance of this account represents the total Accumulated Amortization applied to Company Vehicles.


The amount of accumulated amortization of each vehicle upon sale, liquidation or disposal

The monthly amortization amount applied to Company Vehicles

Comments: Professional tax and accounting advice should be obtained regarding the establishment of proper amortization rates and schedules. The monthly amortization is credited to this account and the off-setting debit is posted to Expense Account 41, Company Vehicles.



185 Leased Vehicles


Purpose: The balance of this account represents the total dollar amount of capitalized Lease and Rental vehicles currently in service under the dealership's own leasing program.


The capitalized cost of Lease and Rental vehicles placed in service

The cost of dealer installed accessories to capitalized Lease and Rental vehicles

The capitalized cost of Lease and Rental vehicles retired from service

Comments: Because of regulations governing leases and the complexity of lease agreements, professional legal and tax advice should be obtained to guide the dealership’s leasing business.

Each vehicle should be tracked on a Lease Vehicle Record. Vehicles in lease service should be depreciated each month.

At the termination of each lease, the vehicle should be transferred to Account 138, Used Vehicles. The transfer cost should be at the appraised current market value. Differences from the residual value should be recorded in Account 390, Lease Income - Leased Vehicles - Acura.

Only vehicles used in the operation of the automobile business should be included in this account.

Each Leased or Rental Vehicle should be detailed in the vehicle inventory record or a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost

Cost of assets should include additional items, such as:



• Freight

• Accessories

• Optional equipment

Rental vehicles should be maintained in according to the manufacturer's recommended service schedule in order to keep warranty coverage in effect.



186 Accumulated Amortization - Leased Vehicles


Purpose: The balance of this account represents the total Accumulated Amortization of vehicles currently leased through the dealership from its own leasing operation, which are recorded in Account 185, Leased Vehicles.


The amount of accumulated amortization of each vehicle when it is retired from lease service

The monthly amortization amount for each Leased Vehicle currently in service

Comments: Professional tax and accounting advice should be obtained regarding the proper method of amortization and schedule. Each vehicle should be set up with a vehicle inventory record. The monthly amortization amount is credited to this account and the off-setting debits are posted to Account 490 for Acura leased vehicles and Account 491 for other makes leased.




188 Refundable Deposits


Purpose: The balance of this account represents the total amount of deposits paid to vendors such as public utilities or telephone companies, which can be refunded to the dealership upon termination of services.


The amount of deposit paid

The amount of deposit refunded

The amount of adjustment necessary to compensate for refunds that are less than the initial deposit amount

Comments: Each vendor should be set up with an Accounts Payable subsidiary record. The amount of the deposit should be recorded on the subsidiary record and debited to this account. When refunds are received the amount is credited to this account. In the event that the refund is less than the deposit, the reason for the reduced refund should be established. The adjusting entry to credit this account for the difference is credited to this account and the off-setting debit is posted to the corresponding expense account.

Some Refundable Deposits such as those placed with utility companies, may be refunded while service is still in effect. Inquiries regarding Refundable Deposits should be made from time to time in order to receive such refunds whenever the dealership becomes eligible.



189 Investments


Purpose: The balance of this account represents the total amount of Investments owned by the dealership other than Marketable Securities, which are recorded in Account 108.


The amount of funds invested in financial instruments that are not Marketable Securities

• Real estate not intended for use in the automobile business

• Other non-automotive assets that are not intended for resale

Original amount of Investment when sold or liquidated

Comments: Each investment should be detailed in a suitable subsidiary record showing:

• Date

• Acquired from

• Description

• Cost

Any profit or gain on the investment should be recorded in Other Income, Account 810 – Miscellaneous. Conversely, any loss is posted to Other Deductions, Account 860 – Miscellaneous.




190 Organization Expense


Purpose: The balance of this account represents the legal and other expenses such as business licenses and filing fees incurred at the beginning of the dealership's legal entity or the time of incorporation.


The amount of legal and other expenses incurred at time of incorporation

The monthly amount of amortization of Organization Expense

Comments: Professional tax, legal and accounting advice should be obtained regarding the proper handling of Organization Expense. Each Expense should be documented with a subsidiary ledger. The monthly amortization is credited to this account and the off-setting debit is posted to Expense Account 78, Amortization of Deferred Charges & Intangibles.




191 Life Insurance - Cash Values


Purpose: The balance of this account represents the cash surrender value of Life Insurance policies owned by the dealership.


The cash value of Life Insurance policies that the dealership owns and for which the dealership is also the beneficiary

Any increase in cash value as premium payments are made

Any accrued insurance dividends or interest

The amount of cash received when the policy is surrendered or cancelled

Comments: Each insurance policy should be documented by a subsidiary ledger showing the insurance company, the policy number and the cash value as reported by the company. Since the cash surrender value may appreciate due to premium payments and dividends, this account should be reviewed and adjusted periodically.




192 Advances - Officers and Employees


Purpose: The balance represents notes and accounts due from dealership officers and other employees for either loans or advances. It should NOT include balances due for merchandise, which should be included with customer notes or accounts receivable in Account 115. Accounts Receivable - Customer Service, Parts, Body Shop.


The amount of cash advanced or loaned to Officers and Employees

The amount of repayment to be applied to the advance

The amount that is deemed to be uncollectible

Comments: As a matter of policy, Advances or loans to employees should be avoided. The salesperson's "draw against commissions" should be settled at month-end. All Advances should be approved by management and documented by a subsidiary ledger. Complete details describing the amount and the repayment agreement should be noted in this account.

Professional Tax and Accounting advice should be obtained in the event that an Officer or Employee defaults on a loan or advance. Proper procedures must be followed regarding write off of the loan or advance and also with respect to the individual's compensation records.




193 Notes / Long-Term Accounts Receivable


Purpose: The balance of this account represents the unpaid balances of notes accepted from customers and other debtors, which are due beyond the next twelve (12) months. This is a control account, which should contain supporting details of all amounts due.


The face value (excluding interest) of notes received from customers and other parties for unpaid purchases

Repayment of notes

Example 1: A "sister" company of the dealership (owned by the same principal) borrows $50,000 with no payback schedule, but with the understanding that the repayment will be made as the "sister" company reports profits. Record the loan as a Note Receivable.




$50,000


Example 2: After the first year, the "sister" company is profitable and repays $10,000 of the Note. Record the receipt of the payment.




$10,000


Comments: A subsidiary ledger should be set up for each account. Diligent efforts to collect overdue amounts must be made.



195 Goodwill


Purpose: "Goodwill" is defined as the amount in excess of the actual asset value paid by a buyer to a seller as part of the purchase price of the dealership. Professional tax and accounting advice should be obtained regarding the assessment of Goodwill.

The balance of this account represents the amount of Goodwill as determined by the dealership's professional tax and accounting advisors.


The amount of purchased Goodwill as a result of settlement of a Buy/Sell Agreement

The monthly amount of amortization of Goodwill

Comments: Entries to this account should be done under the direction of the dealership's professional tax and accounting specialists. The amortization schedule should be followed exactly. The monthly amortization is credited to this account and the off-setting debit is posted to Expense Account 78, Amortization of Deferred Charges & Intangibles.




196 Finance Company Participation


Purpose: The balance of this account represents the total amount of Finance and Insurance Income owed to the dealership, but not yet paid. When retail finance contracts are purchased at a discount by Finance Companies or Banks, the amount of bonus earned by the dealership is calculated. The same holds true for Credit Life, Accident & Health, Gap and other insurance sold by the dealership. Due to the length of time usually experienced in receiving payment, this receivable is grouped with Other Assets, and not treated as current.

Instructions:


The amount of bonus owed to the dealership on retail finance contracts

The amount of bonus owed to the dealership for selling insurance coverage to customers

The amount of payments received from respective Banks, Finance and Insurance companies as compensation for bonuses earned by the dealership

Comments: Each Finance Company, Bank or Insurance Company should be set up with a subsidiary ledger for recording the Finance Company Participation due to the dealership. Each lending institution and/or insurance company should provide a monthly statement showing details of the outstanding transactions.

As payments are received, they are posted as credits to this account.


Revised January 2018 B-1

B- LIABILITIES



201 Bank Loan

Classification: Liabilities

Purpose: The balance of this account represents short term (less than twelve months) loans from banks.


The amount of all payments (not including interest) made on the principal portion of the loan

The amount of principal on short term loans of less than twelve (12) months from banks or other financial institutions

Comments: From time to time it may be necessary to take out a loan to meet temporary cash requirements. This account is established to record loans from banks, which have terms of less than twelve (12) months. Each loan should be maintained in a separate subsidiary ledger. The balance should be reconciled at the end of each month or whenever a statement is received from the lender. Discrepancies should be resolved immediately.

Mortgage Loans secured by Real Estate are recorded in Account 246, Mortgage - Real Estate.

Loans which mature beyond twelve (12) months should be recorded either in Account 240, Notes Payable or Account 255, Other Long Term Debt.

Interest charges should be debited to Account 53, Interest & Bank Charges.



205 Loans on New Vehicles


Purpose: The balance of this account represents the amounts due to the bank or financial institution for financing new vehicles in dealer inventory otherwise referred to as "Floor plan." This is considered to be a short term note (less than twelve months).


The repayment of notes secured by new vehicles in inventory

The amount of "pay down" of aged vehicles in inventory as requested by the bank or financial institution (e.g. G.S.T. reductions based on the agreement with the financial institution)

The pay off of vehicles which are placed in company vehicle service

The lien amount on all new vehicles financed on the "wholesale floor plan" and secured by the vehicles in inventory

Comments: An inventory record should be created for each vehicle. This account should be reconciled with respect to the monthly statement furnished by the lending institution. Discrepancies should be resolved immediately.

When new vehicles are sold, the lien amount should be paid immediately. This account is debited with the repayment amounts. The interest is debited to Account 54, Floor Plan Interest.



206 Loans On Rental Vehicles


Purpose: The balance of this account reflects amounts due to the bank or financial institution for vehicles that are currently placed in rental service - either Service Rental Vehicles recorded in inventory Account 139 or Daily Rental Vehicles recorded in Account 140. Since rental vehicles should be rotated within the model year, this type of financing is considered to be short term (less than twelve months).


The amount of payments made to pay off rental vehicles as they are retired from service

The amount of "pay down" which may be required by the lending institution to periodically reduce the amount financed (e.g. G.S.T. reductions based on the agreement with the financial institution)

The amount of loans secured by Rental Vehicles

Comments: A vehicle inventory record should be established for each Rental Vehicle. The account balance should be reconciled with respect to monthly statements from the financial institution. Discrepancies should be resolved immediately.

When a rental vehicle is taken out of service, it should be transferred from Account 139, Service Rental Vehicles or Account 140, Daily Rental Vehicles to Account 138, Used Vehicles. As the vehicle is sold, the lien should be paid promptly. The interest charges should be debited to Account 492, Amortization, Interest, & Vehicle Maintenance - Rental Vehicles.



207 Loans on Used Vehicles


Purpose: The balance of this account represents amounts due to the bank or financial institution for financing Used Vehicles in the dealer's inventory. Since Used Vehicles should be turned as quickly as possible, the Used Vehicle "Floor Plan" line of credit is considered to be short term (less than twelve months).


The amount of payments made to pay off a Used Vehicle as it is sold to a retail customer, wholesaled to another dealer or scrapped

The amount of "pay down" of aged vehicles which may be required by the financial institution to reduce the amount financed (e.g. G.S.T. reductions based on the agreement with the financial institution)

The amount of loans to finance Used Vehicles while in dealer inventory and also secured by the Used Vehicle

Comments: Each Used Vehicle to be financed under a Floor Plan arrangement should be set up with a vehicle inventory record. The amounts financed should be reconciled with respect to the monthly statement from the financial institution. Discrepancies should be reconciled immediately.

As used vehicles are sold, the lien should be paid promptly. The interest charges should be debited to Account 54, Floor Plan Interest.



208 Loans on Demonstrators / Courtesy vehicles


Purpose: The balance of this account represents the amount due to the bank or financial institution for Demonstrators and Courtesy vehicles on "Floor Plan". Since Demonstrators are changed frequently, this is considered to be a short term loan (less than twelve months).


The amount of payments made on the principal portion of the loan covering Demonstrator and Courtesy vehicles

The amount of "pay down" of aged Demonstrator and Courtesy vehicles which may be required by the financial institution to reduce the amount financed (e.g. G.S.T. reductions based on the agreement with the financial institution)

The amount of loans made on Demonstrators and Courtesy which are also secured by the Demonstrator and Courtesy vehicles

Comments: Each Demonstrator and Courtesy vehicle should be set up with a vehicle inventory record. The account should be reconciled with respect to the monthly statement from the financial institution. Discrepancies should be resolved immediately.

As these vehicles are sold, the lien should be paid promptly. Interest charges should be debited to Account 54, Floor Plan Interest.



209 Loans on Other Inventories


Purpose: The balance of this account represents loans on all Other Inventories recorded in Account 141, Other Inventories.


The amount of payments applied to principal on loans for Other Inventories

The principal amount of loans covering merchandise in inventory

Account 141, Other Inventories

Comments: Each loan should be controlled by a subsidiary ledger and should be reconciled monthly. Discrepancies should be resolved immediately.

As payments are made, the amount of principal applied to principal is debited to this account. The interest is debited to Account 53, Interest & Bank Charges.



210 Car Encumbrances


Purpose: The balance of this account represents the total amount of outstanding "pay-offs" on trade-ins which have finance or lease liens. When a customer trades in a used vehicle before the retail contract is fully paid, the dealership must remit the "pay-off" amount in order to obtain a free and clear vehicle ownership. This account is established to record the amount of outstanding liens on vehicles with finance contracts or lease liens.


The amount of payments made to satisfy the outstanding loan amounts on trade-ins with finance or lease liens

The amount of "pay-off" due to banks or finance companies on vehicles accepted in trade which have finance or lease liens

Comments: Each encumbrance should be setup with a subsidiary record. When financial institutions are contacted to acquire loan or lease information, it is important to get the amount of the loan "pay-off" and the date by which the payment must be made. Remittance to the lending institution must be made by the due date. Late payments will complicate receipt of vehicle ownership and possibly result in collection efforts against the customer who traded in the vehicle.

After the lien pay-off is made, the vehicle ownership should be received in a timely manner from the lending institution. If a vehicle ownership is not received, prompt follow-up action should be taken.

Vehicles which are financed will have the vehicle ownership in the customer's name. If it is a lease, then the vehicle ownership will be in the leasing company's name.

This account should be reconciled at the end of each month and discrepancies should be reconciled immediately.



212 Due on Repossession


Purpose: The balance of this account represents the amount due to the lending institution when a vehicle is repossessed and returned to the dealership. It normally represents the unpaid loan amount on the vehicle plus possible bank fees.

This only applies to vehicles for which the dealership has the obligation to accept the repossessed vehicle - loans with recourse financing arrangements.


The amount paid to lending institutions to satisfy the amount owed on repossessed vehicles

The amount due to lending institutions for repossessed vehicles which the dealership is obligated to accept

Comments: Professional tax and accounting advice should be obtained regarding the settlement obligations of the dealership with respect to the customer in the event that a refund is due.

When a repossessed vehicle is placed into the Used Vehicle inventory, the Actual Cash Value (ACV) should be determined and debited to Account 138, Used Vehicles. If the ACV is less than the amount due to the lending institution, then the difference should be debited to either Account 705, Repossession Losses & Chargebacks - New (for New Vehicles repossessed) or Account 709, Repossession Losses & Chargebacks - Used.



213 Current Portion - Long Term Debt


Purpose: The balance of this account represents the estimated portion of loans or other debts that are payable within the next twelve (12) months.


The monthly reduction of Long Term Debt during the last twelve (12) months of the loan

The estimated amount of Long Term Debt that will be due and payable within the next twelve (12) months or fiscal year

Comments: A best estimate should be made for the amount that is due and payable during the next twelve (12) months or during the current fiscal year. An accurate estimate supports the proper calculation of Net Working Capital and the Current Ratio. The estimate of the Current Portion of Long Term Debt is credited to this account. The offsetting debit is applied to the respective Long Term Liability account.

During the last twelve months of the loan, the actual monthly reduction of the Long Term Debt is debited to this account.



214 Customer Payments


Purpose: The balance of this account represents funds collected from customers which are intended for transfer to a financial institution as part of an instalment payment on a loan.


The amount of payments to cover monthly instalments to the financial institution on behalf of customers

The amount of payments made to cover insurance premiums on behalf of customers

The amount of payments made to cover miscellaneous automobile related debts on behalf of customers

The customer remittances received covering instalment payments on automobile loans

The customer remittances received to cover insurance premiums

The customer remittances received to cover miscellaneous automobile related debts

Comments: At times customers find it more convenient to make their monthly payments at the dealership, instead of directly to the bank or financial institution. A subsidiary record should be established for each customer. The receipt and payments of these amounts should be recorded for control purposes. Payments should be made promptly to avoid penalties.

At the end of each month, this account should be reconciled and discrepancies should be resolved immediately.



215 Trade Accounts Payable


Purpose: The balance of this account represents the amount owed to suppliers, vendors and other providers of goods and services to the dealership. This does NOT include amounts owed to Honda Canada Inc., which are recorded in Account 218, Factory Payable.


The amount of payments made to suppliers for goods and services on open account

The amount of discounts received from suppliers

The amount of credit notes received for material returned to suppliers

The amount of all purchases made by the dealership which have been approved for payment

Comments: A purchase order system should be established to control goods and services ordered by the dealership. A purchase order number should be issued to suppliers at the time the order is placed. Vendor invoices should include the purchase order number.

Each supplier should be set up with separate accounts payable subsidiary ledger. The balances should be reviewed at the end of each month and reconciled with the subsidiary ledger and statements provided by the vendor.



217 Payroll Deductions (To Include All Payroll Deductions)


Purpose: The balance of this account represents the deductions from employee paycheques, which have been collected, but not yet been remitted to the parties to which they are owed.


The amount of payments made to the various authorities and agencies that are due monies from employee payroll deductions

The amount of all Payroll Deductions including the employer contribution

• Income Tax

• C.P.P.

• E.I.

• Group Insurance

• Pension or Retirement Plan

Comments: These deductions are to be remitted on a timely basis to the appropriate authorities. Instructions regarding tax payments for federal, provincial and local governments should be followed exactly, observing due dates and employer obligations. Payroll records should be reconciled with government receipts to make sure that payments have been allocated correctly.

Each employee should have an individual record. A reconciliation should be done at the end of each month and discrepancies should be resolved immediately.



218 Factory Payable


Purpose: The balance of this account represents the amount due to Honda Canada Inc. for purchases of Parts & Accessories and various other billings such as Acura Plus extended service contracts owed to the manufacturer.


The amount of Warranty Credits received from Honda Canada Inc.

The amount of payments made, discounts received and credit notes for items returned

The amount of payment received for

• Sales Programs

• Marketing Allowance

• Wholesale Assistance

The amount of cheques remitted to Honda Canada Inc.

The amount of purchases made from Honda Canada Inc. covering Parts & Accessories, brochures, merchandising materials, and other goods such as

• Auto Shows

• Miscellaneous billings

• Acura Plus Extended Service Contracts

The amount of the cheque or direct deposit received from Honda Canada Inc. if this account had a debit balance at the end of the prior month

Example Record a Parts Stock Order for the amount of $6,000. The G.S.T. assessed is $420.

Journal: Purchase Journal


218 Factory Payable $6,420


$6,000

219A Goods & Services Tax (Input Credit)

$420

Comments: A file should be set up to store individual invoices for goods as they are received. Sub-accounts should be set up to record Acura Plus Extended Service Contracts including G.S.T. At the end of the month, this account should be reconciled with the individual invoices and Warranty Credits received and the monthly Honda Canada Inc. accounts payable statements. Discrepancies should be resolved immediately.





Purpose: The balance of this account represents the Goods and Service Tax (G.S.T.) that has been billed to the dealership.


The amount of G.S.T. incurred on received invoices

The amount transferred to offset a net debit balance from this account and

219B, G.S.T. Payable to

Asset Account 122, G.S.T. Receivable

The amount of cheques issued for payment of G.S.T., with respect to input tax credits

Example 1

Record the purchase of a new vehicle directly from HCI, which has an invoice of $20,000 (including freight, air tax, advertising and Dealer Council), a Marketing Allowance of $300, Wholesale Assistance of $35 and a G.S.T. charge of $1,400.






$35




$1,400


$21,400

Example 2: When reviewing the month-end trial balance, it is determined that the amount of G.S.T. due is $12,000. The balance in Account 219B, Goods & Services Tax (Payable) is $200,000 and the balance in Account 219A, Goods & Services Tax (Input Tax Credit) is $188,000.



When payment of the G.S.T. is made, the entry would be as follows:

Journal: Cash Disbursements Journal



219B Goods & Services Tax (Payable)

$200,000

219A Goods & Services Tax (Input Tax Credit)

$188,000

Example 3: When reviewing the month-end trial balance, it is determined that a debit balance of $4,000 exists (G.S.T. owed to the dealership as a refund). Record the G.S.T. Receivable which is transferred from Account 219A, Goods and Services Tax (Input Tax Credit) where the balance is $225,000 and Account 219B, Goods and Services Tax (Payable) with a balance of $221,000.





$221,000


$225,000


Comments: Account 219A, Goods and Services Tax (Input Tax Credit) is a sub-account, which operates in conjunction with Account 219B, Goods and Services Tax (Payable). For example, Account 219A, which can be referred to as the "Input Tax Credit", may be used to record the amount of G.S.T. incurred on invoices received. Account 219B, which can be referred to as G.S.T. "Billed", may be used to record the G.S.T. billed on sales to customers. At the end of the month, a return is prepared and the difference represents either the amount owed by the dealership or the credit due to the dealership. If the dealership owes G.S.T., then the amount of the payment is credited to Account 219A and debited to Account 219B for the prior months balances as the remittance is tendered. Payments should be made on a timely basis to avoid penalties. The payments made should clear the prior month's G.S.T. balance due.

It is possible that the net balance will be a recovery (receivable), especially if there are major purchases



(inventory and/or fixed assets). If there is a net debit balance in these accounts (indicating that a refund or G.S.T. is due to the dealership), the amount is considered a receivable and should be transferred to Asset Account 122, G.S.T. Receivable, with appropriate adjustments to 219A and 219B. As a result of the transfer, the balance of Accounts 219A and 219B, Goods and Services Tax will be zero ($0.00) at month end.



219B Goods and Service Tax (Payable)


Purpose: The balance of this account represents the net Goods and Service Tax (G.S.T.) owed by the dealership.


The amount of G.S.T. paid when filing the monthly return

The amount transferred to offset a credit balance form this account to

Account 122, G.S.T. Receivable

The amount of G.S.T. billed on

• Sales

• Dealer Trades

The amount of G.S.T. billed on

• The amount of program dollars form HCI

• Marketing Allowance

• Wholesale interest payments

• Income from sundry sources

Example 1: A water pump is sold on a Counter Ticket for $100. It has a cost of sale of $60. The G.S.T. is $7. The P.S.T. is $8.

Journal: Parts Sales Journal


352 Parts-Retail Counter (Sales) $100

452 Parts-Retail Counter (Cost of Sales)

$60


$60

219B Goods & Services Tax (Payable) $7

220 Provincial Sales Tax (Payable) $8


Example 2: When reviewing the month-end trial balance, it is determined that the amount of G.S.T. due is $12,000. The balance in Account 219B, Goods & Services Tax (Payable) is $200,000 and the balance in Account 219A, Goods & Services Tax (Input Tax Credit) is $188,000. Record the payment of the G.S.T.



Journal: Cash Disbursements Journal




$200,000

219A Goods & Services Tax (Input Tax Credit)

$188,000

Example 3: When reviewing the month-end trial balance, it is determined that a debit balance of $4,000 exists (G.S.T. owed to the dealership as a refund). Record the G.S.T. Receivable which is transferred from Account 219A, Goods and Services Tax (Input Tax Credit) where the balance is $225,000 and Account 219B, Goods and Services Tax (Payable) with a balance of $221,000.





$221,000


$225,000


Comments: Account 219B, Goods and Services Tax (Payable) is a sub-account which operates in conjunction with Account 219A, Goods and Services Tax (Input Tax Credit). For example, Account 219A, which can be referred to as the "Input Tax Credit", may be used to record the amount of G.S.T. incurred on invoices received. Account 219B, which can be referred to as G.S.T. "Billed", may be used to record the G.S.T. billed on sales to customers and credit notes from the manufacturer. At the end of the month, a return is prepared and the difference represents either the amount owed by the dealership or the credit due to the dealership. If the dealership owes G.S.T., then the amount of the payment is credited to Account 219A and debited to Account 219B for the prior months balances as the remittance is tendered. Payments should be made on a timely basis to avoid penalties. The payments made should clear the prior month's G.S.T. balance due.

It is possible that the net balance will be a recovery (receivable), especially if there are major purchases (inventory and/or fixed assets). If there is a net debit balance in these accounts (indicating that a refund or



G.S.T. is due to the dealership), the amount is considered a receivable and should be transferred to Asset Account 122, G.S.T. Receivable, with appropriate adjustments to 219A and 219B. As a result of the transfer, the balance of Accounts 219A and 219B, Goods and Services Tax will be zero ($0.00) at month end.



220 Provincial Sales Tax


Purpose: The balance of this account represents the amount of Sales Tax owed to the Province for which payment will be made at a later date.

This account reflects sales tax billed in accordance with government regulations. Remittance is made monthly.


The amount of payment of Provincial Sales Tax remitted

The amount of Provincial Sales Tax billed on retail sales to customers

Comments: Guidelines from the respective Province regarding collection of Sales Tax and procedures for payment along with deadlines should be strictly observed. Payments should be made on a timely basis to avoid penalties and interest. The payment made should clear the prior month's balance due.

Compensation earned by the dealership for collecting Provincial Sales Tax, which is deducted from the amount due, should be credited to Account 806, Compensation Earned - Sales Tax.



221 Vehicle Sales Personnel Compensation


Purpose: The balance of this account represents the accrued commissions and bonuses earned by sales personnel, but not yet paid.


The amount of commissions and bonuses paid to sales personnel

The amount of draws against commissions paid to sales personnel

The amount of commissions and bonuses earned by sales personnel

Comments: This is a control account which is used to track commissions earned and partial payments or advances against future commissions. A supporting schedule should be maintained for each individual salesperson. The balance should be reconciled at month-end and discrepancies should be resolved immediately.



222 Customer Deposits


Purpose: The balance of this account represents the total amount of Customer Deposits received (including trade-ins) which is applied to future purchases.


The amount of deposit which is applied to the sale of a vehicle, service, or parts when the sale is completed

The amount of refund of any deposit when a sale is cancelled

The amount of deposits received from customers as a commitment of intent to purchase vehicles, service or parts in the future

The appraised actual cash value (ACV) of a used car taken in on trade for a vehicle to be delivered in the future

The selling price of parts or accessories sold on a vehicle, but not installed at the time of delivery

Comments: Contrary to reasonable expectations, Customer Deposits are always a Liability until the sale is closed. All deposits are debited to this account. Later when the sale is finalized, the amount of the deposit is credited. Each deposit should be set up with a subsidiary record. Management should establish a policy as to when and under what conditions Customer Deposits are refunded.



225 Accrued Payroll


Purpose: The balance of this account represents the total amount of salaries and wages earned for the month, but unpaid at month end. This is an accrual account for employee compensation other than Sales personnel (see Account 221, Vehicle Sales Personnel Compensation).


The amount of salaries and wages paid to employees

The reversal of the previous month's accrual

The amount of gross earnings of employees

The monthly accrual of the gross amount of employee's earnings since the last pay period until the end of the month

Comments: When pay periods do not coincide with the end of the month, the amount of compensation owed to employees (not including Sales personnel) should be accrued. The gross amount of employee earnings is credited to this account. The offsetting debit is posted to either Account 20, Salaries - Department Managers; Account 21, Salaries - Owners; Account 22, Salaries - Other; or Account 150, Labour in Process.

The month-end balance should be reconciled before preparing the Financial Statement.

At the beginning of the following month, the reversal of the previous month's accrual is debited.



226 Accrued Vacation Pay


Purpose: The balance of this account represents the amount of Vacation Pay earned, but not yet paid to employees.


The amount of compensation paid to employees at the time that vacation is actually taken

The amount of monthly accrual of Vacation Pay earned by employees

Comments: It is important to accrue Vacation Pay each month of the year. As an example, if Vacation Pay is NOT accrued, then the profitability of the vacation month will be impacted by both the absence of the vacationing employee (which may necessitate the hiring of temporary help) and the vacation pay itself. The operating profit of the entire Department will decline during vacation months. Accruing Vacation Pay spreads the expense to each month of the year and allows for better planning and management of each Department.



227 Accrued Interest


Purpose: The balance of this account represents the unpaid interest due on all loans, which is payable in the future.


The amount of interest payments for which an accrual has been previously made

The amount of monthly interest accrued

Comments: For loans that are paid quarterly, annual or in a lump sum, the amount of monthly interest should be estimated and credited to this account. A schedule should be prepared for each loan showing the repayment of principal and interest.



228 Bonuses


Purpose: The balance of this account represents the amount of Bonuses earned by employees, but not yet paid.


The amount of Bonuses actually paid for which an accrual has already been made

The total amount of Bonuses earned, but not paid

Comments: This is a control account and supporting details should be contained in a subsidiary ledger for each employee eligible for earning Bonuses.



230 Deferred Marketing Allowance


Purpose: The balance of this account represents the amount of Marketing Allowance related to new vehicles remaining in inventory.


The amount of Marketing Allowance associated with each new vehicle when the vehicle is sold

The amount of Marketing Allowance for each new vehicle purchased or acquired from Honda Canada Inc. (HCI)

Example 1 Record the purchase of a new vehicle directly from HCI, which has an invoice of $20,000 (including freight, air tax, advertising, and Dealer Council), a Marketing Allowance of $300, Wholesale Assistance of $35 and a G.S.T. charge of $1,400.






$35




$1,400


$21,400

Example 2 When the Honda credit note for $300 is received, record the Marketing Allowance credit as follows:

Journal: Accounts Payable Journal


121 Marketing Allowance Receivable

$300

218 Factory Payable $300

Note: G.S.T. has been excluded from the example above.



Example 3 Record the sale of the new vehicle above for $21,000, the G.S.T. is $1,470, the Provincial Sales Tax is $1,680, and the Vehicle License is $100. There is no trade and the customer has previously paid $6,000 as a cash down payment and finances $18,150.

Journal: New Vehicle Sales Journal



404 New Vehicle (Cost of Sales)

$20,000




$150


$300


$300


$1,470






$18,150

Comments: This account is established to record the deferred recognition of Marketing Allowance amounts, which match the new vehicles as they are sold. This is intended to be a controlled account (controlled by the VIN or Stock Number).

As each new vehicle is received from the manufacturer and placed into the dealership inventory, the Marketing Allowance amount is credited to this Account 230, Deferred Marketing Allowance.

When each vehicle is sold, the respective Marketing Allowance amount is debited to this Account (i.e. reversal of the credit when the vehicle is first place in inventory) and credited to Account 90, Marketing Allowance on New Vehicles Sold.



231 Provision for Income Tax - Current Year


Purpose: This account is intended for dealerships which are corporations. The balance of this account represents the estimated Federal, Provincial and other Income Tax for the current period based on earnings.


The amount of adjustment to decrease the tax liability as a result of determining the final adjusted taxable income for the current fiscal year

The monthly provision for Federal, Provincial and other income tax for the current tax period

The amount of adjustment to increase the tax liability due to the calculation of the final adjusted taxable income for the current fiscal year

Comments: Professional tax and accounting advice should be obtained regarding the estimation, calculation and payment of Federal, Provincial and other Income Tax.



232 Federal & Provincial Taxes - Prior Period


Purpose: This account is intended for dealerships which are corporations. The balance of this account represents the balance due or receivable on Federal, Provincial or other Income Taxes for prior fiscal years.


The amount of payment made for Federal, Provincial or other Income Tax incurred for the prior fiscal year

The amount of refund due to the dealership from the prior year

The amount of estimated or actual Federal, Provincial or other Income Tax due for the prior fiscal year

The amount of refund received from the prior year

Comments: Professional tax and accounting advice should be obtained regarding the proper calculation of Income Tax due. Tax filing and payment deadlines should be observed to avoid penalties.



233 Prepaid Income Tax


Purpose: The balance of this account represents Income Tax instalments for the current year and is used only by dealerships which are corporations.


The amount of prepayments of income tax applied to the current fiscal year

N/A

Comments: Professional tax and accounting advice should be obtained regarding the proper estimation, calculation and payment of Federal or Provincial Income Taxes. Sub-accounts should be set up for Federal and Provincial Income Taxes respectively.

The balance of this account should be reconciled with statements from the respective taxation authorities.

The balance of this account should be reconciled with statements received from government taxation offices.



234 Estimated Income Tax


Purpose: The balance of this account represents the Estimated Income Tax due for the current year.


The monthly off set for the credit entry to

Account 231, Provision For Income Tax - Current Year

The amount of year-end adjustment to increase the value in this account

The amount of year-end adjustment to decrease the value in this account

Comments: The purpose of this account is to be used as the offsetting account for the accruals made to Account 231, Provision For Income Tax - Current Year. Professional tax and accounting advice should be obtained regarding the proper handling of tax matters for the dealership.



240 Notes Payable


Purpose: The balance of this account represents the remaining, long term, principal amount (beyond the next twelve months) of loans carried by the dealership. The balance represents only the long term (due beyond the next twelve months) portion of the loan. The amount due and payable within the next twelve months should be estimated and recorded in Account 213, Current Portion - Long Term Debt.


The amount of payments made which are applied to the principal on loans recorded in this account

The principal amount of long term (longer than the next twelve months) loans, not including Floor Plan, mortgages or Directors' Or Shareholders' Loans

Comments: Each loan should be set up with a separate subsidiary record. It should show the principal, interest rate and the repayment schedule. As payments are made, the amount applied to principal only is debited to this account. The interest is debited to Expense Account 53, Interest & Bank Charges.



246 Mortgage - Real Estate


Purpose: The balance of this account represents the principal of mortgages on Real Estate owned by the dealership and used for automotive purposes. The balance represents only the long term (due beyond the next twelve months) portion of the loan. The amount due and payable within the next twelve months should be estimated and recorded in Account 213, Current Portion - Long Term Debt.


The amount of payment which is applied to the principal portion of Mortgage - Real Estate loans

The principal amount of mortgages carried by the dealership

Comments: Each Mortgage - Real Estate loan should be set up with a subsidiary ledger showing the principal amount, interest rate and the repayment schedule. As payments are made the repayment of principal is debited to this account. The interest portion is debited Expense Account 60, Rent and/or Mortgage Interest.



247 Deferred Taxes


Purpose: The balance of this account represents the amount of tax due for a prior period, but payable in the future with the consent of the taxation authority involved.


The amount of tax payments made on Deferred Taxes recorded in this account

The amount of adjustment allowed to decrease the amount of Deferred Taxes at the end of the year (reduction of tax liability due to operating losses)

The amount of tax liability due which has been deferred for future payment with the consent of the tax authorities

Comments: Professional tax and accounting advice should be obtained regarding the proper handling of Deferred Taxes. As payments are made, the amount applied to the Deferred Tax is debited to this account. The interest and penalties are debited to Expense Account 53, Interest & Bank Charges.



248 Financing Leased Vehicles


Purpose: The balance of this account represents long term financing obtained to underwrite leased vehicles administered by the dealership's leasing operation. The balance represents only the long term (due beyond the next twelve months) portion of the loan. The amount due and payable within the next twelve months should be estimated and recorded in Account 213, Current Portion - Long Term Debt.


The amount of payment applied to principal for loans recorded in this account

The principal amount of financing obtained to pay for vehicles leased to end users under the dealership's leasing operation

Comments: Each vehicle should be set up with a subsidiary record showing the original cost including dealer installed accessories, the principal amount of the loan, the interest rate and the repayment schedule. As payments are made, the amount applied to principal is debited to this account and the interest is debited to the Cost of Sales Account, 490, Amortization, Interest, Maintenance - Leased Vehicles - Acura or Account 491, Amortization, Interest, Maintenance - Leased Vehicles - Other Makes.

The balance should be reconciled at the end of each month and discrepancies should be resolved immediately.



249 Chattel Mortgage


Purpose: The balance of this account represents loans on assets other than real estate. The balance represents only the long term (due beyond the next twelve months) portion of the loan. The amount due and payable within the next twelve months should be estimated and recorded in Account 213, Current Portion - Long Term Debt.


The amount of payment applied to principal on Chattel Mortgage loans recorded in this account

The principal amount of Chattel Mortgages other than real estate

• Furniture

• Service, Parts or Office Equipment

• Receivables

Comments: Each Chattel Mortgage loan should be set up with a separate subsidiary record showing the principal, interest rate and repayment schedule. As payments are made, the amount applied to principal is debited to this account. The interest portion is debited to Expense Account 53, Interest & Bank Charges.

The balance of this account should be reconciled at the end of each month and discrepancies should be resolved immediately.



255 Other Long Term Debt


Purpose: The balance of this account represents the principal of amount of Other Long Term Debts that cannot properly be recorded in any other account. The balance represents only the long term (due beyond the next twelve months) portion of such loans. The amount due and payable within the next twelve months should be estimated and recorded in Account 213, Current Portion - Long Term Debt.


The amount of payment applied to principal

The principal amount of Other Long Term Debt

Comments: Each loan recorded in this account should be set up with a subsidiary record showing the principal amount, the interest rate and the repayment schedule. As payments are made, the amount applied to principal is debited to this account. The interest portion is debited to Expense Account 53, Interest & Bank Charges.

The balance should be reconciled at the end of each month and discrepancies should be resolved immediately.



256 Provision for Repossession


Purpose: The balance of this account represents a contingent liability to cover potential losses due to repossessions on recourse finance contracts.


The amount of loss when a vehicle is repossessed

The monthly Provision For Repossession losses based on New and Used Vehicles sold

Comments: Professional tax and accounting advice should be obtained regarding repossession reserves and the proper handling of repossessed vehicles and the obligations with respect to the customer.



260 Directors' or Shareholders' Loans


Purpose: The balance of this account represents the liability for loans granted by the Directors and Shareholders to the dealership. The balance represents only the long term (due beyond the next twelve months) portion of the loan. The amount due and payable within the next twelve months should be estimated and recorded in Account 213, Current Portion - Long Term Debt.


The amount of payment applied to principal for the loans recorded in this account

The principal amount of loan(s) received from Directors, Shareholders or other officers of the corporation

Comments: Each loan should be set up with its own subsidiary record showing the principal amount, the interest rate and repayment schedule. As payments are made, the amount applied to principal is debited to this account and the interest portion is debited to Expense Account 53, Interest and Bank Charges.

The balance of this account should be reconciled at the end of each month and discrepancies should be resolved immediately.


Revised January 2018 C-1

C- NET WORTH



280 Capital Stock Issued - Common

Classification: Net Worth

Purpose: This account is intended for use by corporations only. The balance represents the value of Common Stock outstanding.


The value of shares of Common Stock re-purchased or retired

The value of Common Stock issued

Comments: Professional tax and accounting advice should be obtained when incorporating and issuing stock. The same applies when stocks are retired. Separate subsidiary records should be kept for each class of shares.



282 Capital Stock Issued - Preferred


Purpose: This account is intended for use by corporations only. The balance of this account represents the value of Preferred Stock issued.


The value of Preferred Stock re-purchased or retired

The value of Preferred Stock issued

Comments: Professional tax and accounting advice should be obtained when incorporating and issuing stock. The same applies when stocks are retired. Separate subsidiary records should be kept for each class of shares.



285 Retained Earnings - Prior Years


Purpose: This account is intended for use by corporations only. The balance of this account represents profits which have been accumulated over prior fiscal periods less accumulated dividends and losses.


The Loss (after income tax recovery, if applicable) for the fiscal year

The amount of dividends declared

The Profit (after taxes) for the fiscal year

Comments: At the end of the fiscal year, the year's Net Profit or Loss (after providing for income taxes) will be transferred to this account.



286 Dividends


Purpose: This account is intended for use by corporations only. The balance of this account represents the amount of Retained Earnings that the Board of Directors has declared to be paid out in Dividends to stockholders.


The amount of corporate earnings that are to be distributed to stockholders in the form of Dividends

The amount transferred from Retained Earnings for Dividend payments (year-end closing entry)

Comments: Professional tax and accounting advice should be obtained to guide the dealership in the Dividend process.



287 Investment - Proprietor or Partners


Purpose: This account is intended for use by dealerships which operate as Proprietorships or Partnerships. The balance of this account represents the amount of accumulated capital invested in the business.


The amount of reduction of Investment by any of the Partners or Proprietor as indicated by

Withdrawals in Account 290, Withdrawals - Proprietor or Partners

The amount of Net Loss for year

The amount of the original Investment and any additional Investments

The accumulated amount of Net Profits at the end of the fiscal years

Comments: Professional tax and accounting advice should be obtained regarding the proper handling of Investments and Withdrawals. Each investor should be maintained on a separate account.



290 Withdrawals - Proprietor or Partners


Purpose: This account is intended for use by dealerships which operate as Proprietorships or Partnerships. The balance of this account represents the amount taken out of the dealership investment by Partners or the Proprietor.


The amount of cash or assets withdrawn by Partners or the Proprietor during the fiscal year

The amount of "credit" balance in this account at the end of the fiscal year which is transferred to Account 287, Investment - Proprietor Or Partners

The amount of "debit" balance at the end of the fiscal year which is to be transferred to Account 287, Investment - Proprietor Or Partners

Comments: Professional tax and accounting advice should be obtained regarding the proper handling of Withdrawals. If more than one investor is involved, separate accounts for each partner should be kept. At the end of the fiscal year, the balance in this account will be transferred to Account 287, Investment - Proprietor or Partners.



299 Profit (Loss) Clearing


Purpose: This account is intended for use as a clearing account to summarize the Net Earnings or Loss for the fiscal year.


The amount in all General Ledger accounts (except balance sheet accounts) which have a debit balance

• Cost of Sales Accounts

• Expense Accounts

• Other Deductions (debit balance)

The amount of Net Profit for the current year which

is transferred to Account 285, Retained Earnings (corporations) or

Account 287, Investment - Proprietor or Partners

The amount in all General Ledger accounts (except balance sheet accounts) which have a credit balance

• Sales Accounts

• Other Income (credit balance)

The amount of Net Loss for the current year which

is transferred to Account 285, Retained Earnings (corporations) or

Account 287, Investment - Proprietor or Partners

Comments: After all the accounts are closed, the net balances in each account are summed up and the Net Profit (Loss) is derived. At the end of the fiscal year, the resulting Net Profit (Loss) is transferred to Account 285, Retained Earnings if the dealership is a corporation or Account 287, Investment - Proprietor or Partners, if the dealership is a proprietorship or partnership.


Revised January 2018 D-1

D- SALES AND COST OF SALES



301-315, New Vehicles

Classification: Sales – New Vehicle Department

The Sales and Cost of Sales Accounts for New Acura Vehicles are shown in the table below:

Sales Cost of

Sales Acura

304 404 ILX

308 408 TLX

309 409 RLX

310 410 RLX Hybrid

312 412 RDX

313 413 MDX

315 415 NSX

Purpose: The balance of these accounts represent the net selling price of new Acura vehicles sold to retail customers. Over allowances and discounts are debited to the sales account which can be interpreted as a net reduction in selling price.


The discount on new Acura vehicles, respectively, sold at retail

The amount of over-allowance on used vehicles taken in on trade

Gross selling price of new Acura vehicles sold at retail (including dealer installed accessories and SYST / MKTG Support as stated on the unit invoice).

401-415 New Vehicles

Classification: Cost of Sales – New Vehicle Department

Purpose: The balance in the corresponding cost of sales accounts, represent the inventory value of new Acura vehicles sold (including dealer installed accessories and SYST / MKTG Support as stated on the unit invoice).


The inventory cost of new Acura vehicles sold at retail

N/A



The selling price of dealer installed accessories

Comments: The cost of the vehicle should be determined from a vehicle inventory record (“Deal Jacket” or "Washout Sheet"). The vehicle inventory record should reflect factory invoice cost (which includes Dealer Association advertising contributions, option packages, special edition packages SYST / MKTG Support as stated on the unit invoice and dealer installed accessories). If any items have not been posted to this record, it is necessary to refer to underlying repair orders or invoices to determine the vehicle's cost.

When new vehicles are sold at retail to the end user, the advertising charge should be broken out and debited to Expense Account 38, Advertising. This results in a better timing and matching of the advertising funds to the vehicle when it is sold.

http://tsi-teamserver:46758/Desktop/Expenses/38_Advertising.htm



320 Internal New Vehicle


Purpose: The balance of this account represents the selling price of New Internal Vehicles.


N/A

The gross selling price of New Acura Vehicles sold to the dealership’s leasing company or daily rental operation (including dealer installed accessories)

The gross selling price of New Acura Vehicles purchased by dealership employees, HCI associates or other courtesy deliveries

420 Internal New Vehicle


Purpose: The balance of this account represents the inventory cost, including dealer installed accessories. Sales information should be recorded on the subsidiary vehicle inventory record (“Deal Jacket” or “Washout Sheet”). Each vehicle sale should be cost individually.


The inventory value of New Acura Vehicles sold in Account 320, Internal New Vehicle (including dealer installed accessories)

N/A

Comments: These Sales and Cost of Sales Accounts are established to record the transactions of New Internal Vehicles only. Account 320, Internal New Vehicles should be used for new vehicles sold to the dealership's own Lease or Rental inventory or for new vehicles sold at a reduced profit margin to a dealership employee or Honda Canada Inc. associates.



When new vehicles are sold at retail to the end user, the advertising charge should be broken out and debited to Expense Account 38, Advertising. This results in a better timing and matching of the advertising funds to the vehicle when it is sold.



321 Fleet Sales


Purpose: The balance of this account represents the net selling price of new Acura vehicles sold to fleet customers.


The discount on new Acura vehicles sold to fleet customers

The amount of over-allowance on used vehicles taken in on trade

Gross sales price of new Acura vehicles sold to fleet customers

421 Fleet Sales


Purpose: The balance of this account represents the inventory value (cost) of new Acura vehicles sold to fleet customers.

This account should be used for new vehicle sales to fleet users and leasing companies.


The inventory value of new Acura vehicles sold to fleet customers, including dealer installed accessories

N/A

Comments: Please refer to the fleet vehicle guidelines to determine which customers qualify as fleet customers and for the current procedures governing fleet transactions.

For Fleet vehicles only, the advertising charge should remain with the inventory value of the vehicle and should not be expensed. This allows both the Fleet Manager and Office Staff to have clear knowledge of the true vehicle cost when delivering highly competitive Fleet Deals to commercial customers.



323 Certified Pre-Owned Acura – Retail

Classification: Sales – Used Vehicle Department

Purpose: The balance of this account represents the selling price of Acura Certified Pre-Owned vehicles less any allowances over the Actual Cash Value (ACV) of trade-ins.


The discount on respective Acura Certified Pre-Owned vehicles sold at retail

The amount of over-allowance on subsequent used vehicles taken in on trade

The gross selling price of respective Acura Certified Pre-Owned vehicles sold at retail

423 Certified Pre-Owned Acura – Retail

Classification: Cost of Sales – Used Vehicle Department

Purpose: The balance of this account represents the inventory cost, not including reconditioning. Sales information should be recorded on the subsidiary vehicle inventory record (“Deal Jacket” or "Washout Sheet"). Each vehicle sale should be cost individually.


The inventory value of respective Acura Certified Pre-Owned vehicles sold at retail excluding reconditioning

The amount of the Certification fee when Certified vehicles are sold to retail customers

N/A

Comments: At the time of acquisition, a decision to apply for Certification should be made regarding Pre-Owned Acuras. If the vehicle is to be Certified, the required inspection and reconditioning should be performed. The vehicle is then reported as a Certified vehicle via Hondacom. The Certification will be in effect for a ninety (90) day period.



When the Certified vehicle is sold during the Certification period to a retail customer, the Certified vehicle is registered with Honda Canada Inc. via Hondacom. This activates the Certified warranty coverage for the customer and initiates the billing of the Certification fee to the dealership. The Certification fee is posted to the dealer’s open account (Acura Plus Account) with Honda Canada Inc. and will appear on the monthly statement. The amount of the Certification fee is debited to Account 423, Certified Pre-Owned Acura – Retail (Cost of Sales Account) and the offsetting credit is posted to Account 218, Factory Payable including the G.S.T. component.

Please refer to the Certification Policy Manual for additional information about the proper procedures regarding Certified vehicles.



325 Non-Certified, Pre-Owned Acura - Retail


Purpose: The balance of this account represents the selling price of Non-Certified Pre-Owned Acura vehicles less any allowances over the Actual Cash Value (ACV) of trade-ins. Acura dealers who sell Non-Certified Used Honda vehicles should record Honda sales in Account 327, Used Other Retail. Account 325 is only for recording sales of same "make" Non-Certified Vehicles.


The discount on respective Non-Certified Pre-Owned Acura vehicles sold at retail


The gross selling price of respective Non-Certified Pre-Owned Acura vehicles sold at retail

425 Non-Certified Pre-Owned Acura – Retail


Purpose: The balance of this account represents the inventory cost, not including reconditioning. Sales information should be recorded on the subsidiary vehicle inventory record (“Deal Jacket”). Each vehicle sale should be cost individually.


The inventory value of respective Non-Certified Pre-Owned Acura vehicles sold at retail excluding reconditioning

N/A

Comments: These Sales and Cost of Sales Accounts are established to record the transactions of respective Non-Certified Pre-Owned Acura Vehicles only. Please refer to Account 323, Certified Pre-Owned Acura – Retail, for details about accounting procedures.

For the purposes of this manual, "Certified" is defined as vehicles that have been reconditioned according to



Honda standards, have passed the required inspection and are reported to Honda Canada Inc. via Honda.com.



327 Used Other – Retail


Purpose: The balance of this account represents the selling price of Used Other vehicles less any allowances over the Actual Cash Value (ACV) of trade-ins. Other Used Vehicles are defined as any non-Acura vehicle for Acura dealers.


The discount on Used Other vehicles sold at retail


The gross selling price of Used Other vehicles sold at retail

427 Used Other – Retail


Purpose: The balance of this account represents the inventory cost, not including reconditioning. Sales information should be recorded on the subsidiary vehicle inventory record (“Deal Jacket”). Each vehicle sale should be cost individually.


The inventory value of Used Other vehicles sold at retail excluding reconditioning

N/A

Comments: These Sales and Cost of Sales Accounts are established to record the transactions of Used Other Vehicles only. Please refer to Account 323, Certified Pre-Owned Acura – Retail, for additional details about accounting procedures.



332 Used Vehicle Wholesale


Purpose: The balance of this account represents the selling price of Used Vehicles sold at wholesale, or scrapped.


N/A The selling price of Used Vehicles sold at wholesale or scrapped

432 Used Vehicle Wholesale


Purpose: The balance of this account represents the inventory value of Used Vehicles sold wholesale, including reconditioning costs.


The inventory value, including reconditioning, of all Used Vehicles sold to wholesale customers

The inventory value of Used Vehicles, which are scrapped

The cost of auction fees and associated transportation charges, if applicable

N/A

Comments: The cost of the vehicle should be determined from a vehicle inventory record. Each vehicle sale should be cost individually.

Sales of used vehicles to junk yards and revenue from the scrapping of each vehicle should also be credited to Account 332, Used Vehicle Wholesale. A scrapping policy should be established covering such vehicles. Payment for scrapped vehicles should be by cheque or draft.



350 Parts Wholesale

Classification: Sales – Parts Department

Purpose: The balance of this account represents Acura Parts, sold to commercial accounts for re-sale to an end-user.


The refund amount of "core" deposits or charges

The amount of Parts which are returned by customers and for which a refund or credit is issued

The selling price of Acura Parts sold to customers for resale

Independent Repair Shops

Body Shops

Service Stations

The selling price of Acura Parts sold to fleet accounts

The amount of core deposits or charges

450 Parts Wholesale

Classification: Cost of Sales – Parts Department

Purpose: The balance of this account represents the inventory value of Acura Parts, sold to commercial accounts for resale to an end user.


The inventory value (dealer cost) of Parts sold to customers for resale

The inventory value (dealer cost) of Parts sold to fleet accounts

The cost of "core" charges sold to customers for resale

The cost of sale on refunds issued to customers for returned Parts

Comments: Selling Parts to local body shops, independent repair shops and service stations can be good business. Many of these "commercial accounts" will want to purchase on open account. Each customer applying for credit should be required to submit a standard form showing, at minimum, business name, business address, phone, fax, bank account number, credit references and owner's



name, address and phone. The manager authorizing credit should be held responsible for collecting late payments.

The term "core deposit" or "core charges" originated with the early days of radiator repairs. Before anti-freeze was formulated, radiators would become clogged with mineral deposits after extended usage. Radiator "cores" would have to be removed, cleaned and replaced. To minimize down time, a system of exchanging only the cores was created. When radiator service was done, the customer would purchase a cleaned radiator and leave a deposit for the core. After removing and replacing the old radiator, the customer would return the old radiator and receive a refund for his core deposit or charge.

Today, core deposits or charges apply to rebuilt parts such as alternators, transmissions and rebuilt engines. The amount of the core deposit or charge is credited to the Sales Account and the refund is debited.

For all Wholesale Parts transactions, a numbered set of Counter Tickets should be used. Voided tickets should be approved by an authorized manager and the ticket should be kept intact. All missing Counter Tickets must be accounted for.

Note: Accessory sales should be posted to Account 359, Accessories.



352 Parts Retail Counter


Purpose: The balance of this account represents Acura Parts sold to retail customers.


The refund amount of core de-posits

The amount of Parts which are returned by customers and for which a refund or credit is issued

The amount of Acura Parts sold directly to retail customers

Walk In Counter Sales

Mail Order

The amount of core deposits placed on Acura Parts

452 Parts Retail Counter


Purpose: The balance of this account represents the inventory value of Acura Parts sold to retail customers on counter tickets.


The inventory value (dealer cost) of Acura Parts sold directly to retail customers

The cost of sales of refunds issued to customers for returned Parts

Comments: Customers are increasingly purchasing Parts to enhance the appearance or performance of their vehicles. This account is established to record the Parts that are sold to retail customers directly from the Parts Department.

Please see the Comments in Account 350, 450 Parts Wholesale for more detail regarding procedures.



354 Parts Customer Repair Order, Service


Purpose: The balance of these accounts represents Parts sold on Customer mechanical Repair Orders.


N/A The selling price of Parts sold to customers on Acura mechanical repair orders

The billing price of Parts sold to HCI under the "No Charge Maintenance Program"

454 Parts Customer Repair Order, Service


Purpose: The balance of these accounts represents the inventory value of the Parts sold on Customer Repair Orders.


The inventory value (dealer cost) of Parts sold to customers on mechanical repair orders

The inventory value (dealer cost) of Parts sold to HCI under the "No Charge Maintenance Program"

N/A

Example 1: Record the replacement of a set of front struts and rear shock absorbers where the total selling price of the repair is $300. $180 is for Parts which has an inventory cost of $110. The mechanical labour is $120 and the technician is paid $40. The G.S.T. is $21 and the Provincial Sales Tax is $24.



Journal: Service Sales Journal


354 Parts Customer Repair Order, Service (Sales)

$180

454 Parts Customer Repair Order, Service (Cost of Sales)

$110

144 Parts and Accessories (Inventory)

$110

370 Labour Customer Repair Orders, Service (Sales)

$120

470 Labour Customer Repair Orders, Service (Cost of Sales)

$40



$21



Example 2: Record a Customer Repair Order for 48,000K service performed under the HCI "No Charge Maintenance Program". The total amount of the repair is $200. The labour charge is $140 and the technician is paid $45. The parts are $60 with a cost of $35. The G.S.T. is $14 and the Provincial Sales Tax is $16.




$140


$45



$60


$35



$14


117 Accounts Receivable - Factory $230

Comments: Procedures covering this account are similar to Accounts 350, 450 Parts Wholesale with the exception that numbered Repair Orders should be used in sequence. Voided Repair Orders should be authorized by a manager and the copies should be kept intact. All missing Repair Orders must be accounted for.



355 Parts Customer Repair Order, Body


Purpose: The balance of this account represents Parts sold to repair vehicles in the Body Shop.


The selling price of new and unused Parts returned to inventory

The selling of Parts sold to customers on Body Shop repair orders

455 Parts Customer Repair Order, Body


Purpose: The balance of this account represents the inventory value of Parts sold on Body Shop Repair Orders.


The inventory value (dealer cost) of Parts sold to customers on Body Shop repair orders

The inventory value (dealer cost) of Parts returned to inventory

Comment: Procedures covering this account are similar to Accounts 350, 450 Parts Wholesale with the exception that numbered Repair Orders should be used in sequence. Voided Repair Orders should be authorized by a manager and the copies should be kept intact. All missing Repair Orders must be accounted for.



356 Parts Warranty


Purpose: The balance of this account represents Acura Parts sold on Warranty Repair Orders.


N/A The selling of Parts sold on Acura Warranty repair orders

456 Parts Warranty


Purpose: The balance of this account represents the inventory value of Parts for Acura Warranty repairs.


The inventory value (dealer cost) of Parts sold on Acura Warranty repair orders

N/A

Comments: Procedures covering this account are similar to Accounts 350, 450 Parts Wholesale with the exception that numbered Repair Orders should be used in sequence. Voided Repair Orders should be authorized by a manager and the copies should be kept intact. All missing Repair Orders must be accounted for.



358 Parts Internal


Purpose: The balance of this account represents Parts sold on Internal Repair Orders.


The selling price of Parts removed from vehicles in inventory and returned to the Parts Department

The selling price of Parts sold on Internal repair orders

458 Parts Internal


Purpose: The balance of this account represents the inventory value of the Parts installed on Internal Repair Orders.


The inventory value (dealer cost) of Parts sold on Internal repair orders

The inventory value (dealer cost) of Parts removed from vehicles in inventory and returned to the Parts Department

Comments: Internal repair orders are the source documents related to the re-conditioning of used vehicles, installation of Parts on new or used vehicles, dealer policy work, Demo Maintenance and Company Vehicle Maintenance.

Procedures covering this account are similar to Accounts 350, 450 Parts Wholesale with the exception that numbered Repair Orders should be used in sequence. Voided Repair Orders should be authorized by a manager and the copies should be kept intact. All missing Repair Orders must be accounted for.





Purpose: The balance of this account represents the total amount of Acura Accessories sold.


The selling price of Acura Accessories removed from vehicles in inventory and returned to the Parts Department

The selling price of Acura Accessories sold to customers on

• Mechanical Repair Orders

• Body Shop Repair Orders

• Warranty Repair Orders

• Internal Repair Orders

The amount of Acura Accessories sold directly to retail customers

• Walk In Counter Sales

• Mail Order

The selling price of Acura Accessories sold to wholesale customers for resale

The selling price of Acura Accessories sold to fleet accounts



Purpose: The balance of this account represents the inventory value of Acura Accessories sold in Account 359, (Sales) Accessories - Acura.


The inventory value (dealer cost) of Acura Accessories sold to customers on transactions covered by

Account 359, (Sales) Accessories - Acura

The inventory value (dealer cost) of Acura Accessories removed from vehicles in inventory and returned to the Parts Department

http://tsi-teamserver:46758/TSiWiki/TSi%20Wiki%20File%20Library/Year%20over%20Year%202014/YoY%20-%20HONDA%20(2014)/Accounting%20Manuals/~$09%20Acura%20Accounting%20Manual_v1_English.doc

http://tsi-teamserver:46758/TSiWiki/TSi%20Wiki%20File%20Library/Year%20over%20Year%202014/YoY%20-%20HONDA%20(2014)/Accounting%20Manuals/~$09%20Acura%20Accounting%20Manual_v1_English.doc



Comments: The inventory level of Accessories should be controlled more closely than other Parts because many Accessories are specifically designed for certain model years. Careful forecasts should be made to estimate the short-term demand for accessories and inventory levels should be maintained accordingly. Also, monitoring the Accessories sold Per New Vehicle Retailed (PNVR) will provide a measure of sales staff and F & I effectiveness.



360 Accessories – Other


Purpose: The balance of this account represents the total amount of Non-Acura Accessories sold.


The selling price of Non-Acura Accessories removed from vehicles in inventory and returned to the Parts Department

The selling price of Non-Acura Accessories sold to customers on

• Mechanical Repair Orders

• Body Shop Repair Orders

• Warranty Repair Orders

• Internal Repair Orders

The amount of Non-Acura Accessories sold directly to retail customers

• Walk In Counter Sales

• Mail Order

The selling price of Non-Acura Accessories sold to wholesale customers for resale

The selling price of Non-Acura Accessories sold to fleet accounts

460 Accessories – Other


Purpose: The balance of this account represents the inventory value of Non-Acura Accessories sold in Account 360, (Sales) Accessories - Other.


The inventory value (dealer cost) of Non-Acura Accessories sold to customers on transactions covered by

Account 360, (Sales) Accessories - Other

The inventory value (dealer cost) of Non-Acura Accessories removed from vehicles in inventory and returned to the Parts Department



Comments: The inventory level of Accessories should be controlled more closely than other Parts because many Accessories are specifically designed for certain model years. Careful forecasts should be made to estimate the short-term demand for accessories and inventory levels should be maintained accordingly. Also, monitoring the Accessories sold Per New Vehicle Retailed (PNVR) will provide a measure of sales staff and F & I effectiveness.



362 Tires


Purpose: The balance of this account represents the selling price of Tires sold at retail, wholesale or internally.


The amount of refund allowed for Tires returned to the Tires Inventory

The selling price of Tires sold at retail, wholesale or internally

462 Tires


Purpose: The balance of this account represents the total inventory value of Tires sold.


The inventory value (dealer cost) of tires sold

The inventory value (dealer cost) allowed for Tires returned to the Tires Inventory

Comments: Procedures covering this account are similar to Accounts 350, 450 Parts Wholesale. Please see the Comments in Account 350, 450 Parts Wholesale for more detail regarding procedures.



365 Gas, Oil & Grease


Purpose: The balance of this account represents the selling price of Gas (fuel), Oil, and Grease sold at retail, wholesale or internally.


N/A The selling price of Gas (fuel), Oil, and Grease (lubricants) sold at retail, wholesale or internally

465 Gas, Oil & Grease


Purpose: The balance of this account represents the total inventory value of Gas (fuel), Oil, and Grease sold.


The cost of Gas (fuel), Oil or Grease sold at retail, wholesale or internally

N/A

Comments: The supplies of Gasoline (fuel), Oil and Grease are subject to inventory "shrinkage" due to evaporation, spillage, inaccurate measurements or carelessness. Tight control measures must be put in place to minimize this loss.

Standard estimates may be used to cost Oil and Grease. However, Gasoline (fuel) should be recorded exactly according to the volume registered on the pump. A physical inventory should be taken at the end of each month and reconciled with the book value. Consistent shrinkages indicate a need for tighter control.



367 Miscellaneous


Purpose: The balance of this account represents the total sales of Miscellaneous, non-automotive and aftermarket merchandise.


The amount of any discounts allowed on the sale of Miscellaneous parts or accessories

The selling price of aftermarket merchandise including (but, not limited to) the following:

• Camper Conversions

• Mobile TV, VCR, DVD Installations

• Custom Security Systems

• On Board Satellite Mapping and Navigation Systems

• The selling price of non-automotive merchandise purchased for re-sale

467 Miscellaneous


Purpose: The balance of this account represents the total cost of Non-Automotive Merchandise, Miscellaneous and Aftermarket Merchandise.


The cost of Non-Automotive Merchandise, Miscellaneous and Aftermarket Merchandise recorded as a sale in

Account 367, Miscellaneous

The inventory value of Miscellaneous merchandise scrapped or otherwise disposed of

N/A



Comments: In general goods which are inventoried in Account 145, Parts & Accessories - Other are recorded in Account 367, Miscellaneous (Sales) and Account 467 (Cost of Sales). The same principles which apply to other inventories apply here as well. A physical inventory should be taken at the end of each month unless impractical to do so. The value of the inventory should be adjusted to current market prices. Special control should be taken to minimize loss.



370 Labour Customer Repair Orders, Service

Classification: Sales – Service Department

Purpose: The balance of this account represents the total labour sold on repairs paid by customers.


N/A

The selling price to customers for all mechanical labour performed including labour related to Express and lube, oil and filter services

The billing price to HCI for mechanical labour performed under the "No Charge Maintenance Program"

470 Labour Customer Repair Orders, Service

Classification: Cost of Sales – Service Department

Purpose: The balance of this account represents the actual cost of the mechanical labour paid to the technician.


The cost of mechanical labour performed including cost of labour related to Express and lube, oil and filter services

The cost of mechanical labour performed on "No Charge Maintenance Program"

N/A

Example 1: Record a Customer repair Order for a mechanical labour charge of $100 for a complete wheel alignment, tire balancing and rotation (no parts are required). The technician is paid $30. The G.S.T. is $7 and the Provincial Sales Tax is $8.






$100


$30

150 Labour in Process $30

219B Goods and Services Tax (Payable) $7



Example 2: Record a Customer Repair Order for 48,000K service performed under the HCI "No Charge Maintenance Program". The total amount of the repair is $200. The labour charge is $140 and the technician is paid $45. The parts are $60 with a cost of $35. The G.S.T. is $14 and the Provincial Sales Tax is $16.




$140


$45



$60


$35



$14


117 Accounts Receivable - Factory $230

Comments: The cost of labour sales represents the amount of compensation earned by service technicians. As a matter of good practice, each Repair Order (R.O.) should be time stamped (flagged) to record the precise time that a vehicle is under repair. If technicians are paid on an hourly-rate basis, each labour sale is cost by multiplying the technician’s hourly wage times the hours applied on a particular job. If technicians are paid on a flat rate basis, the cost is computed by multiplying each flat rate labour hour sale by the technician’s flat rate.

Repair Orders should be numbered and used in sequence. Repair Orders which are spoiled should be



voided by the manager and kept intact. Missing Repair Orders should be identified and accounted for. In addition, each Repair Order should have the customer's authorization to perform the repairs indicated.

At the end of each month, an inventory of incomplete or "Open" Repair Orders should be taken. The amount of labour already paid or payable on Open Repair Orders should agree with the balance in Account 150, Labour in Process. A reconciliation should be done and any required adjustments should be recorded in Account 480, Unapplied Time - Service.

http://tsi-teamserver:46758/Desktop/Balance_Sheet/Assets/150_Labour_In_Process.htm

http://tsi-teamserver:46758/Desktop/Balance_Sheet/Assets/150_Labour_In_Process.htm

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http://tsi-teamserver:46758/Desktop/Honda%20English%20Manual/480_Unapplied_Time,_Service.htm



371 Labour Customer Repair Orders, Body & Paint

Classification: Sales - Body Shop Department

Purpose: The balance of this account represents the total amount of Body Shop labour sold on customers’ vehicles.


N/A

The selling price to customers for all Body Shop labour performed on customer vehicles

471 Labour Customer Repair Orders, Body & Paint

Classification: Cost of Sales - Body Shop Department

Purpose: The balance of this account represents the actual cost of compensation to the Body Shop technicians.


The cost of Body Shop labour performed on customer vehicles

N/A

Comments: The procedures for managing Repair Orders are similar to Accounts 370, 470 Labour Customer Repair Orders – Service. Please see the Comments in this section.



372 Labour Warranty, Service


Purpose: The balance of this account represents the total labour on repair orders submitted on claims for Warranty payment, done on Acura vehicles. Acura dealers may only perform Warranty Service on Acura vehicles still under the manufacturer's warranty.


N/A

The selling price of Warranty Claims for all mechanical labour performed on new vehicles still under the Acura warranty

The selling price of Warranty Claims for all mechanical labour performed on vehicles under the Acura Plus extended warranty

472 Labour Warranty, Service


Purpose: The balance of this account represents the actual cost of compensation to the technician, done on Acura vehicles.


The cost of mechanical labour submitted on Warranty Claims to Honda Canada Inc.

N/A

Comments: A Repair Order must be prepared for all service work done under Warranty. A Warranty Claims register should be maintained to record claims and document payment. At the end of each month, the Claims register should be reconciled and discrepancies should be resolved immediately.

The procedures for managing Repair Orders are similar to Accounts 370, 470 Labour Customer Repair Orders, Service. Please see the Comments in this section.



374 Labour Internal, Service


Purpose: The balance of this account represents the Internal Labour performed for other departments in the dealership.


N/A

The selling price to other departments on Internal repair orders for all mechanical labour performed on vehicles

Installation of Accessories

Used Vehicle Reconditioning

Repairs done under Dealer Policy work

Maintenance repairs of company owned vehicles

474 Labour Internal, Service


Purpose: The balance of this account represents the actual cost of compensation to the technician on Internal repair orders.


The cost of Internal mechanical labour performed

N/A

Comments: The procedures for managing Repair Orders are similar to Accounts 370, 470 Labour Customer Repair Orders, Service. Please see the Comments in this section.



375 Labour Internal, Body & Paint


Purpose: The balance of this account represents the amount of internal Body Shop labour done for all departments of the dealership.


N/A

The selling price of Body Shop labour performed for the various other departments of the dealership

475 Labour Internal, Body & Paint




The cost of internal Body Shop labour performed for the various other departments of the dealership

N/A

Comments: The procedures for managing Repair Orders are similar to Accounts 370, 470 Labour Customer Repair Orders, Service. Please see the Comments in this section.



376 Labour P.D.I., Service


Purpose: The balance of this account represents the total amount of Labour billed for P.D.I. Service.


N/A

The amount of mechanical Labour required to properly perform Pre-Delivery Inspection Service on new vehicles

476 Labour P.D.I., Service


Purpose: The balance of this account represents the total amount of compensation to the service technicians for performing P.D.I. Service.


The cost of Labour required to perform P.D.I. Service on new vehicles

N/A

Comments: P.D.I. Labour should be prepared on an Internal Repair Order. After the service is completed, the Internal amount of the P.D.I. Labour is credited to the Sales Account, 376 and the offsetting debit is expensed to Account 03, Pre-Delivery. The Cost of Sales debited to Account 476 and the offsetting credit is posted to Account 150, Labour in Process.


It is important to note that only the labour related to the PDI labour should be charged to Account 376,476 Labour P.D.I., Service and that any other service labour operation performed on new vehicles should be charged to Account 374, 474 Labour Internal, Service.

Your dealership management system must be properly configured to ensure that the Labour PDI, Service can be



measured separately and the service staff must understand how to properly close the Labour P.D.I. in order to properly reflect the Labour P.D.I., Service on the Monthly Financial Statement.

When compiling the Monthly Financial Statement for the dealership, the dealership controller should review the number of repair orders displayed on the Labour P.D.I. to ensure this value is reasonable before submitting their Financial Statement.



377 LOF/Express Labour


Purpose: This account should no longer be used. All income generated by Express services in the Service Department and single item repairs performed with lube, oil and filter services should be recorded in Account 370, Labour, Customer Repair Orders, Service.

477 LOF/Express Labour


Purpose: This account should no longer be used. All cost of compensation to the technician for labour related to Express services and lube, oil and filter services should be recorded in Account 470, Labour, Customer Repair Orders, Service.

Comments: All dealers should use accounts 370 and 470 to record sales and related cost of sales respectively for LOF and Express services whether or not an Express bay is available.

When compiling the Monthly Financial Statement for the dealership, the dealership controller should ensure that there are no items reported on the Express/LOF lines of the Financial Statement to ensure accurate and consistent reporting across all Honda dealerships.



379 Labour Warranty, Body & Paint


Purpose: The balance of this account represents the amount of Body Shop labour done on the vehicle that a warranty claim is to be filed.


N/A

The selling price of Warranty Claims for all Body Shop labour performed on new vehicles still under the manufacturers’ warranty

479 Labour Warranty, Body & Paint




The cost of Body Shop labour performed under factory warranty

N/A

Comments: A Repair Order must be prepared for all Body Shop work done under Warranty. A Warranty Claims register should be maintained to record claims and document payment. At the end of each month, the Claims register should be reconciled and discrepancies should be resolved immediately.




382 Sublet Repairs, Service


Purpose: The balance of this account represents the total work, parts and service sold on repairs done outside of the dealership.


N/A

The selling price of Sublet work (done by outside vendors) sold to customers

The selling price of Sublet work performed for other dealership departments such as Used Vehicles (specialized Reconditioning repairs)

The selling price of Sublet work performed under factory warranty

482 Sublet Repairs, Service


Purpose: The balance of this account represents the total cost of Sublet work done outside the dealership.


The cost of Sublet work paid to vendors and suppliers

N/A

Comments: A Purchase Order system should be used to control Sublet Repairs. A Repair Order should also be prepared for each Sublet job. The Purchase Order number should be written on the Repair Order. When the Sublet is complete, the invoice should be compared to the Purchase Order before payment is made. Any discrepancy should be resolved immediately.



383 Sublet Repairs, Body & Paint


Purpose: The balance of this account represents the amount of Body Shop sublet work done.


N/A The selling price of Sublet Body Shop work (done by outside vendors) sold to customers

The selling price of Body Shop sublet work performed for other dealership departments

The selling price of sublet work performed under factory warranty

483 Sublet Repairs, Body & Paint


Purpose: The balance of this account represents the total cost of sublet work done.


The cost of Body Shop sublet work paid to outside vendors and suppliers

N/A

Comments: A Purchase Order system should be used to control Sublet Repairs. A Repair Order should also be prepared for each Sublet job. The Purchase Order number should be written on the Repair Order. When the Sublet is complete, the invoice should be compared to the Purchase Order before payment is made. Any discrepancy should be resolved immediately.



385 Supplies, Body & Paint


Purpose: The balance of this account represents the amount of materials used and sold at retail, wholesale or internally in the Body Shop.


N/A

The selling of all Body Shop materials sold to customers

The selling price of all Body Shop materials sold on warranty claims

The selling price of all Body Shop materials sold to all departments (internal)

485 Supplies, Body & Paint


Purpose: The balance of this account represents the cost of the Body & Paint supplies sold.


The inventory value (cost) of all materials sold and used in the Body Shop

The adjustment required when the physical inventory total is less than the General Ledger account balance

The adjustment required when the physical inventory is greater than the General Ledger account balance

Comments: Materials pertaining to Body and Paint operations should be cost individually on each repair order.



390 Lease Income - Leased Vehicles - Acura

Classification: Sales - Lease and Rental Department

Purpose: The balance of this account represents the total amount of income earned by the leasing of Acura vehicles.


N/A

The amount of monthly lease payments earned from Acura lease customers

The amount of "drive off" costs paid by Acura lease customers, at the time of delivery

Comments: Each lease should be set up with its own subsidiary ledger. Like any other receivable, past due amounts should be followed up for payment. This account should be reconciled at the end of each month and discrepancies should be resolved immediately.



391 Lease Income - Leased Vehicles - Other Makes


Purpose: The balance of this account represents the total amount of income earned by leasing of Other Make (non-Acura) vehicles.


N/A

The amount of monthly lease payments earned from lease customers of Other Makes

The amount of "drive off" costs paid by non-Acura lease customers at the time of delivery

Comments: Each lease should be set up with its own subsidiary ledger. Like any other receivable, past due amounts should be followed up for payment. This account should be reconciled at the end of each month and discrepancies should be resolved immediately.



392 Rental Income


Purpose: The balance of this account represents the total amount of income resulting from the dealership's daily rental business.


N/A

The amount of income produced by daily Rental vehicles

Comments: Each Rental vehicle should be transferred to Account 140, Daily Rental Vehicles or Account 139, Service Rental Vehicles. The income produced as a result of renting these vehicles to customers is credited to this account. Assuming that Rental customers pay by credit card, the net amount of the payment is debited to Account 109, Cash Sales Clearing and the credit card fee is debited to Expense Account 53, Interest & Bank Charges.



394 Lease and Rental Disposal Sales


Purpose: The balance of this account represents any gain resulting from the retirement of Lease or Rental vehicles.


N/A

The amount of gain produced when a Lease or Rental vehicle is removed from service and transferred to Account 138, Used Vehicles (Inventory)

494 Lease and Rental Disposal Sales

Classification: Cost of Sales - Lease and Rental Department

Purpose: The balance of this account represents any loss resulting from the retirement of Lease or Rental vehicles.


The amount of loss sustained when a Lease or Rental vehicle is removed from service and transferred to Account 138, Used Vehicles (Inventory)

N/A

Comments: When Lease or Rental vehicles are placed into service, an amortization factor is applied to derive a residual value at the termination of service. The residual value may be higher or lower than the market value of the vehicle. The vehicle should be appraised at the end of service and transferred to Account 138, Used Vehicles at the Actual Cash Value (ACV or market value) for sale. If the ACV is higher than the residual, then a gain is realized. Conversely, if the ACV is lower than the residual, then the dealership will absorb a loss. These accounts are created to record such gains and losses.

Professional tax and accounting advice should be obtained regarding the amortization rates and the calculation of the residual values.



424 Certified Pre-Owned Acura Reconditioning


Purpose: The balance of this account represents the total amount of reconditioning cost applied to Certified Pre-Owned Acura vehicles, which have been sold at retail.


The amount of reconditioning cost of Certified Pre-Owned Acura vehicles sold to retail customers as recorded on vehicle inventory record

N/A

Comments: Only the Used Vehicle Manager (or the appraiser) or the Sales Manager should prepare Internal Repair Orders for Used Vehicle Reconditioning. As the Reconditioning is completed, the cost of the repairs are added to the vehicle’s inventory record and debited to Account 138, Used Vehicles (Inventory). At the time of sale, when the “deal” is cost, the Reconditioning is broken out and debited to this account. The original acquisition value (Actual Cash Value – ACV) is debited to the cost of sale account (Account 423, Certified Pre-Owned Acura – Retail). The offsetting credit to Account 138, Used Vehicles, relieves the inventory account.

It is important to accurately record Reconditioning and show it on the Financial Statement. Monitoring Reconditioning is one measure to keep this cost under control. Without controls, Reconditioning can get out of hand and result in a “buried” unit. On the other hand, if Reconditioning is insufficient, the vehicle may not be appealing to the buying public and result in lower gross profits. Reconditioning costs are also an indicator of the accuracy of the initial appraisal.



426 Non-Certified Pre-Owned Acura Reconditioning


Purpose: The balance of this account represents the total reconditioning costs applied to respective Non-Certified Pre-Owned Acura vehicles sold at retail (to end users). It is important to know the amount of reconditioning performed on used vehicles since such work influences the saleability of the vehicle.


The Reconditioning cost of Non-Certified Pre-Owned Acura vehicles, sold at retail

N/A

Comments: When a trade-in (or any used vehicle) is appraised, the estimated repairs should be deducted from the Actual Cash Value (ACV). Only the Used Vehicle Manager (or the appraiser) or the Sales Manager should be allowed to prepare the internal repair order for reconditioning work. The repairs should be done at the internal labour rate and completed promptly. The internal repair order should be closed out on a timely basis and the cost debited to the inventory value, Account 138, Used Vehicles.

Please refer to Account 424, Certified Pre-Owned Acura - Reconditioning for additional details about accounting procedures.



428 Used Other Reconditioning


Purpose: The balance of this account represents the total amount of reconditioning cost applied to Used Other vehicles, which have been sold at retail.


The amount of reconditioning cost of Used Other vehicles sold to retail customers as recorded on vehicle inventory record

N/A

Comments: Only the Used Vehicle Manager (or the appraiser) or the Sales Manager should prepare Internal Repair Orders for Used Vehicle Reconditioning. As the Reconditioning is completed, the cost of the repairs are added to the vehicle’s inventory record and debited to Account 138, Used Vehicles (Inventory). At the time of sale, when the “deal” is cost, the Reconditioning is broken out and debited to this account. The original acquisition value (Actual Cash Value – ACV) is debited to the cost of sale account (Account 427, Used Other – Retail). The offsetting credit to Account 138, Used Vehicles, relieves the inventory account.

It is important to accurately record Reconditioning and show it on the Financial Statement. Monitoring Reconditioning is one measure to keep this cost under control. Without controls, Reconditioning can get out of hand and result in a “buried” unit. On the other hand, if Reconditioning is insufficient, the vehicle may not be appealing to the buying public and result in lower gross profits. Reconditioning costs are also an indicator of the accuracy of the initial appraisal.



435 Inventory Revaluation


Purpose: The balance of this account represents the "write down" of Used Vehicles to adjust the inventory value to current market prices.


The month-end and year-end adjustment of Used Vehicle Inventory value to match current market prices

The amount of adjustment to increase inventory value if the value of a vehicle goes up (classic or custom vehicles)

Comments: Generally speaking, Used Vehicles depreciate every month. As unsold Used Vehicles remain in inventory, the value decreases - and they become subject to additional Reconditioning and Inventory Maintenance. Good practice dictates that Used Vehicles, which remain in inventory, should be re-appraised and that the inventory value be adjusted to agree with current market prices. This account is established to record such adjustments.

As adjustments are made, the amount is debited to this account and the offsetting credit is applied to Account 138, Used Vehicles.



463 Parts Discount Earned


Purpose: The balance of this account represents all discounts received from Honda Canada Inc. under the Stock Order system and/or periodic promotions from Honda.


The amount of premium (additional gross profit) paid to another dealer for purchasing a difficult to find part

The amount of discount or re-stocking charge incurred when Parts or Accessories are returned to Honda Canada Inc. or other suppliers

The amount of discount earned on purchases of promotional Parts & Accessories

Comments: The amount of the discount is credited to this account when Parts & Accessories are purchased under a promotion. However, the respective Parts & Accessories should be placed in inventory at the regular cost. By doing so, the costing will be consistent with identical items that may already be in stock. Once again, the reduction in purchase price is recorded in this account.



464 Parts Inventory Adjustment


Purpose: The balance of this account represents the amount of adjustment required to either increase or decrease the "book value" of the Parts & Accessory Inventory, Accounts 144, 145 and 148.


The Adjustment amount to decrease inventory book value to agree with total of the physical inventory value

The Adjustment amount to decrease the inventory book value as a result of a price update from Honda Canada Inc.

The adjustment amount required when the physical inventory is short (less than) the inventory

balance in Account 148, Tires - Inventory

The adjustment amount required when the physical inventory is short (less than) the inventory

balance in Account 151, Gasoline (fuel), Oil, & Grease - Inventory

The amount of parts and accessories that are disposed of or otherwise scrapped

Comments: At least once per year, a physical inventory of Parts & Accessories on hand should be taken. Based on the actual count, the value of the Inventory should be adjusted. Missing items are considered "shrinkage" and will decrease the value. The value of the "shrinkage" should be debited to this account.



480 Unapplied Time, Service


Purpose: The balance of this account represents compensation paid to or accrued by Service Technicians that cannot be recovered by billing to customers, warranty claims or internal work. When there is a discrepancy between the sum of labour paid on incomplete Repair Orders and the balance in Account 150, Labour in Process, an adjustment is made according to the instructions below.


The amount of adjustment required when the total labour paid or accrued on incomplete Repair Orders is lower than the balance

in Account 150, Labour in Process

The amount of compensation paid to or accrued by Service Technicians for performing non-mechanical work for which no revenue can be collected and for which no Expense Account can be properly charged

The amount of adjustment required when the total labour paid on incomplete Repair Orders is higher than the balance in

Account 150, Labour in Process

Comments: Generally, the balance of this account can be interpreted as the amount of "idle time" in the Service Department.

In addition, if the balance of this account is consistently a debit balance, then there might be an error in costing.

Wages for holidays and training school attendance should not be included in this account, but should be recorded in Expense Account 23, Absentee & Vacation Pay.



481 Unapplied Time, Body & Paint


Purpose: The balance of this account represents compensation paid to or accrued by Body Shop Technicians that cannot be recovered by billing to customers, warranty claims or internal work. When there is a discrepancy between the sum of labour paid on incomplete Repair Orders and the balance in Account 150, Labour in Process, an adjustment is made according to the instructions below.


The amount of adjustment required when the total labour paid or accrued on incomplete Repair Orders is lower than the balance

in Account 150, Labour in Process

The amount of compensation paid to or accrued by Body Shop Technicians for performing non-mechanical work for which no revenue can be collected and for which no Expense Account can be properly charged

The amount of adjustment required when the total labour paid on incomplete Repair Orders is higher than the balance in

Account 150, Labour in Process

Comments: Generally, the balance of this account can be interpreted as the amount of "idle time" in the Body Shop Department.

In addition, if the balance of this account is consistently a debit balance, then there might be an error in costing.

Wages for holidays and training school attendance should not be included in this account, but should be recorded in Expense Account 23, Absentee & Vacation Pay.



490 Amortization, Interest, Maintenance, Leased Vehicles,

Acura


Purpose: The balance of this account represents the total amount of expense related to supporting Acura vehicles which are leased to customers.


The amount of monthly Amortization applied to leased Acura vehicles

The amount of monthly interest to finance (similar to floor plan) leased Acura vehicles

The amount of maintenance cost related to leased Acura vehicles

N/A

Comments: Each leased Acura vehicle should be set up with its own subsidiary ledger to record Amortization and all other charges.

Professional tax and accounting advice should be obtained regarding the Amortization rates that may be applied to Leased vehicles.



491 Amortization, Interest, Maintenance, Leased Vehicles,

Other Make


Purpose: The balance of this account represents the total amount of expense related to supporting Other Make vehicles which are leased to customers.


The amount of monthly Amortization applied to leased Other Make vehicles

The amount of monthly interest to finance (similar to floor plan) leased Other Make vehicles

The amount of maintenance cost related to leased Other Make vehicles

N/A

Comments: Each leased Other Make (non – Acura) vehicle should be set up with its own subsidiary ledger to record Amortization and all other charges.

Professional tax and accounting advice should be obtained regarding the Amortization rates that may be applied to Leased vehicles.



492 Amortization, Interest and Vehicle Maintenance


Purpose: The balance of this account represents the total amount of expense related to supporting Rental Vehicles.


The amount of monthly Amortization applied to daily Rental Vehicles

The amount of monthly interest to finance (similar to floor plan) daily Rental Vehicles

The amount of maintenance cost related to daily Rental Vehicles

N/A

Comments: Each Rental vehicle should be set up with its own subsidiary ledger to record Amortization and all other charges.

Rental Vehicles should be maintained according to the manufacturer's recommended service schedule in order to keep the warranty in effect.

Professional tax and accounting advice should be obtained regarding the Amortization rates that may be applied to Rental Vehicles.


Revised January 2018 E-1

E- EXPENSES



Expense Distribution

Managing an automobile dealership in today’s market is a complicated task. It is the equivalent of running five (5) or six (6) separate businesses under one roof. Each department (New Vehicles, Used Vehicles, Parts, Service, Leasing, and Body Shop) must work together and cooperate to maximize the success of the dealership. Yet, each department must also be held accountable for generating sales and managing expenses to produce an operating profit. In order to determine departmental profitability, each department should be treated as a distinct business entity. This is known as the “Profit Centre Concept” of dealership management.

The Acura Chart of Accounts and Financial Statements provide the structure to record sales and cost of sales for each department with precision. Expenses are not as clear. This manual defines specific expense accounts, which categorize all expenses that a dealership is likely to incur. However, the additional step of pro-rating each expense to the respective department (that benefits from the expenditure) is an important step in gaining control over the profitability of the total dealership. If the distribution of expenses is handled properly, each department becomes a “Profit Centre”. When each department is managed with a profit objective, then all departments should contribute to the success of the total dealership.

The reasons for proper expense distribution are:

Determining Return on Investment Compensating Department and Key Dealership Managers Controlling Expenses Calculating Break Even Levels Developing Operating Budgets Setting Sales Objectives.

The Expense Accounts consists of four digits. Expenses for each department are organized by the following department numbers.

The department designations are as follows:

New Vehicle 1200 - 1280

Used Vehicles 1300 - 1380

Parts 1400 - 1480

Service 1500 - 1580

Body Shop 1600 - 1680

Leasing 1800 - 1880

Other (as required) 2800 - 2880

Each Expense Account number is formed by using the department number above and appending the two (2) digit identifying number for each category.

Example: The salary of the Parts Department Manager would be charged to Account 1420 (Parts Department is 1400 series and 20 is the category for Salaries – Department Managers).

Similarly, the maintenance of the service truck would be charged to account 1541.



There are three major expense categories: 1.) Variable Expenses; 2.) Semi-Fixed Expenses; and 3.) Fixed Expenses

(1) Variable Expenses are proportionate to the volume of new and used vehicle sales. These expenses will vary according to fluctuations in vehicle sales, e.g., an increase in sales will in turn cost more in pre-delivery expenses, sales commissions, etc.

Note: A separate department should be maintained for "other products" sold by the dealership.

Pages 3 and 5 of the Dealer Financial Statement allow for such a department.

A list of Variable Expenses follows:

New Vehicle Used Vehicle Leasing

1200 1300 1800

--01 Compensation - Vehicle Sales Personnel

1201 1301 1801

--02 Compensation - Finance & Insurance

1202 1302 1802

--03 Pre-Delivery 1203 1303 1803

--05 Policy Inspection 1205 1305 1805

(2) Semi-Fixed Expenses recur each month, but vary to some extent with the level of overall dealership sales activity. These items are more "fixed" in nature, yet will vary somewhat to the degree of sales activity, for example: a proposal to increase labour sales may include more advertising and employee training.

A list of Semi-Fixed Expenses follows:



New

Vehicle

Used

Vehicle Parts Service

Body

Shop Leasing Other

1200 1300 1400 1500 1600 1800 2800

--20 Salaries - Department Managers

1220 1320 1420 1520 1620 1820 2820

--21 Salaries - Owners 1221 1321 1421 1521 1621 1821 2821

--22 Salaries - Others 1222 1322 1422 1522 1622 1822 2822

--23 Absentee & Vacation Pay

1223 1323 1423 1523 1623 1823 2823

--24 Employee Benefits

1224 1324 1424 1524 1624 1824 2824

--30 Stationery - Office Supplies

1230 1330 1430 1530 1630 1830 2830

--31 Shop Tools - Sundry Supplies

1231 1331 1431 1531 1631 1831 2831

--34 Laundry - Uniforms

1234 1334 1434 1534 1634 1834 2834

--35 Janitor Services - Cleaning

1235 1335 1435 1535 1635 1835 2835

--36 Postage 1236 1336 1436 1536 1636 1836 2836

--37 Policy Adjustments - Parts & Service

1237 1337 1437 1537 1637 1837 2837

--38 Advertising 1238 1338 1438 1538 1638 1838 2838

(3) Fixed Expenses relate to expenses that do not vary with sales activity, these items are relatively "fixed" in nature and occur each month whether a sale is made or not.

A list of Fixed Expenses follows:



New Vehicle

Used Vehicle

Parts Service Body Shop

Leasing Other

1200 1300 1400 1500 1600 1800 2800

--60

Rent and/or Mortgage Interest

1260 1360 1460 1560 1660 1860 2860

--61

Amortization of Leasehold Improvements

1261 1361 1461 1561 1661 1861 2861

--62

Property Maintenance

1262 1362 1462 1562 1662 1862 2862

--63

Property Taxes

1263 1363 1463 1563 1663 1863 2863

--64

Building Insurance

1264 1364 1464 1564 1664 1864 2864

--65

Building Amortization

1265 1365 1465 1565 1665 1865 2865

--68

Business & Other Taxes

1268 1368 1468 1568 1668 1868 2868

--69

Amortization - Equipment & Fixtures

1269 1369 1469 1569 1669 1869 2869

--70

General Insurance

1270 1370 1470 1570 1670 1870 2870

--73

Maintenance of Equipment

1273 1373 1473 1573 1673 1873 2873

--74

Heat, Light, Power & Water

1274 1374 1474 1574 1674 1874 2874

--75

Equipment Rental

1275 1375 1475 1575 1675 1875 2875

--78

Amortization of Deferred Charges & Intangibles

1278 1378 1478 1578 1678 1878 2878

--80

Licenses (Company Only)

1280 1380 1480 1580 1680 1880 2882

Whenever possible, an expense should be charged to the department which is clearly responsible as in the examples above. When more than one department is involved, the allocation of expense becomes more involved. For example, if one manager has responsibility for both New and Used Vehicle sales, it would be fair to pro-rate the manager’s salary to each department. This can be achieved by estimating the amount of time and energy the manager puts into each department. If the manger devotes 55% to the New Vehicle Department, then the remaining 45% should be charged to Used Vehicles.

Some expenses that are incurred for the benefit of multiple departments (semi fixed and fixed) require different allocation methods. The proper



distribution of these expenses is necessary to determine true departmental profitability. There are several criteria for determining the distribution of these expenses:

Specific Usage

Gross Profit Contribution

Estimated Time Contribution

Equal Share

Relative Value Factor

Specific Usage involves estimating a reasonable percentage of the expense items (supplies, services, equipment, etc.) that were used or that should be charged to a specific department. The total expense is then multiplied by each Department’s percentage to determine the Department's share of the expense. An example of this would be coloured flags for the used vehicle lot which should be charged directly to the used vehicle department only.

Gross Profit Contribution is based on the percent of gross profit contribution from each department. The allocation percentages would be based on the total departmental income earned in the previous fiscal year. This may be useful for allocation data processing services, or telephone expense.

Estimated Time Contribution involves estimating a reasonable percentage of the time dedicated to each department with respect to the total time worked. The total expense is then multiplied by that percentage to determine the specific department's share of the expense. For example, janitorial expenses are usually billed for the entire dealership. If it takes 10 hours to clean the entire dealership at night and 2 hours are spent in the Parts Department, then 20% of the entire bill should be charged to Parts.

Equal Share is a very simple allocation method that is used on for small or incidental expenses that cannot be easily identifiable to one department therefore the expense is divided equally among departments, e.g., donations.

Relative Value Factor is a technique that is best applied to Fixed Expenses. The dealership must assign a value to each department based on real estate market value of each department’s location within the dealership physical plant. Another way of looking at this would be to pose a hypothetical question as to how much rent could be charged if each part of the dealership facility were offered to a tenant for the New Vehicle portion, Used Vehicles, etc. Typically the rent factor for the New Vehicle Department would be twice as much as Service, Parts or Body Shop, because the New Vehicle Department occupies the part of the facility with the most customer exposure. Similarly, the Used Vehicle Department’s rent factor is normally 1.5 times the rent factor of Fixed Operations. This does not imply that Fixed Operations are less important, but only that Fixed Operations can conduct business on real estate that has a lower rent factor.



The Relative Value Factor is then multiplied by the specific department's square footage to determine the relative square foot value percentage the expense is then multiplied by that percentage to determine a department's share of the expense.

Example:

Department Sq. Ft. Occupied

(Building only)

Relative

x Value

Factor

Relative

= Sq. Ft.

Value

Percent

New Vehicle 4,600 2 9,200 40%

Used Vehicle 1,500 1.5 2,250 10%

Parts & Access. 2,600 1 2,600 11%

Service: Mech. 8,000 1 8,000 35%

Body Shop 1

Lease & Rental 360 1 360 2%

Other 500 1 500 2%

Total 17,560 22,910 100%

Note: Dealerships with Body Shops should factor in the space occupied by the Body Shop operation.

The derived Percent in the right hand column is used to pro-rate expenses to each department. For example, if the monthly rent is $40,000, then the New Vehicle Department should be charged 40% or $16,000 – and so forth for each other Department.

The Profit Centre method of departmentalizing expenses allows for the calculation of an operating profit for each department. When each department and each manager is held accountable for Profit or Loss responsibilities, an incentive is created to produce gross profits and control expenses. Using the “P & L” to structure management incentives can be a motivating force to keep each department operating at peak productivity and efficiency.



01 Compensation - Vehicles Sales Personnel

Classification: Expenses – Variable Selling

Purpose: The balance of this account represents the amount of total salaries, wages, commissions and incentives paid or accrued to the sales department staff.


The amount of pay which includes salaries, wages, commissions and minimum guarantees earned by salesperson for selling new and used vehicles

The amount of additional compensation earned

• Spiffs and Bonuses

• Prices and Premiums

• Other Incentives

• Fees and Commissions Paid to Outsiders (non – employees)

• Month – end accrual of amounts earned during the current month, but payable in a subsequent period

The reversal of the previous month – end accrual

Comments: Expense Distribution: Each expense should be distributed to the New, Used Vehicle or Lease & Rental Department, respectively. For example, expenses related to New Vehicle Sales should be charged to the New Vehicle Department (1200). Correspondingly, Used Vehicle expenses should be charged to the Used Vehicle Department (1300) and Lease & Rental expenses should be charged to the Lease & Rental Department (1800). Expenses which apply to all three (3) should be pro-rated in the proportion which reflects the benefit that each department receives.

Pay plans should be used to establish individual vehicle objectives or targets. In order to control compensation expense, a regular review of incentive plans should be done to monitor the effectiveness of the incentives and the performance of the Sales Department. A constant assessment should be made of each individual salesperson's productivity.



Regarding Fees and Commissions paid to non-employees, a sub-account should be established for each party. Professional tax and accounting advice should be obtained regarding the proper reporting of taxable income paid to non-employees.

Note: The Sales Manager's salary portion should be recorded in Account 20, Salaries - Managers.



02 Compensation - Finance & Insurance


Purpose: The balance of this account represents the amount of total compensation paid to or accrued for F & I Mangers on the sales of finance contracts and insurance.


The amount of all compensation earned by Finance & Insurance, Aftermarket (Protection Plan, Other Merchandise) Personnel

• Salaries

• Wages

• Guarantee

• Commissions

• Bonuses

• Incentives

Month-end accrual of amounts earned during the current month, but payable in a subsequent period

The reversal of the previous month – end accrual




03 Pre - Delivery


Purpose: The balance of this account represents the total expense of preparing and maintaining vehicles for display and delivery.


The amount of expense incurred to prepare or maintain a vehicle for sale

• P.D.I. costs for New Vehicles only

• Wash and Detail expenses

• Maintenance of fluid levels and tire pressures

• Gasoline (fuel), Oil, and Grease

• Emission and Safety Inspection costs for Used Vehicles (not including repairs which should be considered as re-conditioning costs)

• Cost to recharge the battery

• Cost of supplies to maintain vehicles

N/A




05 Policy Inspection


Purpose: The balance of this account represents the total cost of “goodwill” considerations given to customers by the dealership to promote customer satisfaction.


The cost of repairs or merchandise given to satisfy customers by the dealership for which there is no charge to the customer or Honda Canada Inc.

N/A

Comments: Repairs of minor scratches and minor mechanical adjustments, which are not covered under warranty and not charged to the customer, are recorded as an expense in this account. This includes Labour, Parts, materials and/or Sublet Repairs. In order to administer this properly, the dealership Sales and Service Personnel must have a clear understanding of the Honda Canada Inc. Warranty and Dealership policies. The quality of the P.D.I. should be spot checked to insure proper preparation of New Vehicles and the authorization of new and used vehicle policy adjustments should be made by the Sales Manager only.

Expense Distribution: Each expense should be distributed to the New, Used Vehicle or Lease & Rental Department, respectively. For example, expenses related to New Vehicle Sales should be charged to the New Vehicle Department (1200). Correspondingly, Used Vehicle expenses should be charged to the Used Vehicle Department (1300) and Lease & Rental expenses should be charged to the Lease & Rental Department (1800). Expenses which apply to all three (3) should be pro-rated in the proportion which reflects the benefit that each department receives.



20 Salaries - Managers

Classification: Expenses – Employment

Purpose: The balance of this account represents the total compensation (including bonuses) paid or payable to Managers and Supervisors.


The compensation paid or pay-able to Managers and Supervisors (including bonuses)

N/A

Comments: The salaries of managers functioning in general supervisory capacities (such as department manager) should be charged to the respective department. Managers who supervise more than one department should be distributed on an equitable basis to each department involved. The method of pro-ration of Supervisors’ Salaries should be based on the amount of time and energy required to manage the respective department. For managers such as the General Manager and Office Manager, the salaries should be pro-rated to all departments.



21 Salaries - Owners


Purpose: The balance of this account represents the total compensation (not including bonuses) paid or payable to Owners.


The compensation paid or payable to Owners (not including bonuses)

N/A

Comments: The Salaries of Owners functioning in general supervisory capacities (such as general manager) should be distributed on an equitable basis to each contributing department.



22 Salaries - Others


Purpose: The balance of this account represents the total compensation of employees who are not classified as Manager, Supervisor, Sales, F & I, or Productive Personnel (Service Technicians).


The total compensation of non-supervisory, non-sales and non-service technician employees

• Accountants & Bookkeepers

• Service Advisors

• Parts Counter People

• Parts Truck Drivers

• Cashier

• Reception

• Administrative Staff

• Porters and Lot Attendants

• Maintenance People

• Other Employees

N/A

Comments: The wages or salaries of other non-managerial should be charged to the respective department. Personnel who support more than one department should be distributed on an equitable basis to each department involved. The method of pro-ration of Salaries - Other should be based on the amount of time and energy devoted to the respective department. For Maintenance Staff and Security Officers and others who support all departments, the wages and salaries should be pro-rated to all departments.



23 Absentee And Vacation Pay


Purpose: The balance of this account represents the total amount of pay accrued by employees when they are on excused absences.


The total compensation paid or payable to employees who are on authorized leave from the dealership

• Vacation Pay

• Sick Pay

• Statutory Holiday Pay

• Jury Duty Pay

The amount of any adjustment necessary to correct the accrual in this account

Comments: The Absentee and Vacation Pay should be charged to the respective department. Personnel who support more than one department should be distributed on an equitable basis to each department involved. The method of pro-ration of Absentee and Vacation Pay should be based on the amount of time and energy devoted to the respective department. For personnel who support all departments, the wages and salaries should be pro-rated to all departments.

A monthly accrual for Leave and Vacation compensation should be established for each employee. By expensing the monthly accrual by debiting Account 23, Absentee and Vacation Pay and crediting Account 226, Accrued Vacation Pay, a provision is made for managing payroll expenses during vacation seasons when many employees take time off. The accrual has the effect of spreading compensation for time off throughout the entire year and results in a more accurate expense and profit analysis during the months when employees take vacation.



24 Employee Benefits


Purpose: The balance of this account represents the total cost of employee benefits plans.


The cost or accrual of premiums for employee benefit plans such as

• Workplace Safety Insurance Boards (Worker's Compensation Insurance)

• Employment Insurance (E.I.)

• Canada Pension Plan (CPP)

• Health Insurance

• Life Insurance

• Pension Plans

• Government Health Tax based on payroll

• Child Care

• Other employee programs

The employee contribution for any employee benefit plan premium

Comments: The Employee Benefits of dealership personnel should be charged to the respective department. Employees who support more than one department should be distributed on an equitable basis to each department involved. The method of pro-ration of Benefit expenses should be based on the amount of time and energy devoted to the respective department. For personnel who support all departments, the respective Employee Benefits expenses should be pro-rated to all departments.



30 Office Supplies

Classification: Expenses – Semi-Fixed

Purpose: The balance of this account represents the total cost spent for Office Supplies.


The cost of all supplies, stationery and business forms

• Repair Orders

• Counter Tickets

• File Folders

• Used Vehicle Appraisal Forms

• Odometer Affidavits

• Invoices

• Stationery (Letterhead)

• Toner Cartridges

• Note Pads

• Binders

• General Office Supplies

N/A

Comments: When only one department benefits from Office Supplies, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



31 Shop Tools - Sundry Supplies


Purpose: The balance of this account represents the total cost of miscellaneous tools and supplies acquired for general dealership usage.


The cost of small tools and supplies such as, but not limited to:

• Screwdrivers, Utility Knives, etc.

• Cleaning Supplies

• Light Bulbs

• Extension Cords

• Surge Protectors for Office Equipment

• Shipping and Mailing Supplies

The cost of Service Department supplies such as hardware (nuts and bolts) or other consumable supplies which do not have part numbers and are not generally sold item by item

The cost of any other supply item which cannot be categorized in other accounts

The value of shop supplies used and reported on Repair Orders such as, but not limited to:

• Brake Cleaner

• Solvents

Comments: In general small tools and supplies are defined as items with a life expectancy of one (1) year or less.

When only one department benefits from Shop Tools - Sundry Supplies, the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



32 Courtesy Vehicles


Purpose: The balance of this account represents the expenses incurred to properly maintain vehicles, which are classified by the dealership as Courtesy Vehicles for Service and Parts customers, inventoried in Account 139, Courtesy Vehicles - Inventory.


The expenses related to operating and maintaining Courtesy Vehicles

• Gasoline

• Car Washes

• Detailing

• Required Maintenance

• Repairs

• Emission and Safety Inspections

• License, Registration and Title Fees

Monthly amortization of Courtesy Vehicles

• The amount of adjustment required to increase the account balance when there has been an under-provision of monthly amortization

The amount of adjustment required to reduce the account balance when there has been an over-provision of monthly amortization

Example 1: Record the transfer of a car to the Courtesy Vehicle Inventory to be used as a loaner car for service and parts customers. The inventory value is $20,000. (Note: Please consult your accounting and tax professional(s) regarding the applicable provincial or local usage taxes, which are assessed on Courtesy Vehicle Inventory.)





Example 2: Record the license, registration and title fees of $120 paid to the motor vehicle department for the Courtesy Vehicle above. Since both Service and Parts Departments benefit from Courtesy Vehicles provided to



Service and Parts customers, the expense is evenly divided between both departments.

Journal: Disbursements Journal




104 Bank Account $120

Example 3: Record the installation of splash guards installed on the Courtesy Vehicle above. An internal repair order is prepared for a total sale of $180. The internal sales price of the splash guards is $105 with an inventory value of $60. The internal labour is $75, of which $25 is paid to the technician.





458 Parts - Internal (Cost of Sales) $60


374 Labour - Internal, Service (Sales) $75


$25


Example 4: Record the payment of the monthly gasoline charges at the local gas station for the amount of $1,500. $600 is documented as the amount charged to re-fuel Courtesy Vehicles. The $600 expense is evenly divided between the Service and Parts Departments. The remaining $900 is allocated as Company Vehicle Expense which has been determined to be in the following manner: New Vehicles - $200, Used Vehicles - $100, Service Department - $200, Parts Department - $400. The above does not include gasoline purchased for new or used vehicle deliveries. (Consideration should be made for unbilled gasoline expenses by setting up a month-end accrual.)



Journal: Disbursements Journal




1241 Company Vehicle (New) $200

1341 Company Vehicle (Used) $100

1441 Company Vehicle (Parts) $400

1541 Company Vehicle (Service) $200


Example 5: Record the expense for routine factory recommended service performed on a Courtesy Vehicle. The total cost of the service is $220 allocated evenly between Parts and Service Departments. The labour is $150 and the amount paid to the technician is $50. The parts internal selling price is $60 and the inventory value is $40. The oil required for the service is $10 with an inventory value of $7.





374 Labour - Internal, Service (Sales)

$150


$50



458 Parts - Internal (Cost of Sales)

$40

144 Parts and Accessories (Inventory)

$40

365 Gas (Fuel), Oil & Grease (Sales)

$10

465 Gas (Fuel), Oil & Grease (Cost of Sales)

$7

151 Gas (Fuel), Oil & Grease (Inventory)

$7

Example 6: The Courtesy Vehicle above is amortized at the rate of $250 per month. Record the monthly amortization.




34 Laundry - Uniforms


Purpose: The balance of this account represents the total cost of providing uniforms for employees who require them and laundry services for items that require regular cleaning.


The cost of uniform and laundry service

The cost of cleaning other items such as

• Shop Towels

• Seat and Fender Covers

• Wiping Rags

• Showroom Entrance Mats

The amount of the employee’s share (payroll deduction) for uniform and laundry service

Comments: When only one department uses Laundry and Uniforms, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



35 Janitor Services - Cleaning


Purpose: The balance of this account represents the total expense incurred to pay for Janitorial care provided by an outside service.


The amount paid to an outside supplier for Janitorial Service

N/A

Comments: The cost of Janitor Services should be pro-rated among all departments based on the proportional size of the area occupied and the relative cost of the service.



36 Postage


Purpose: The balance of this account represents the total cost of Postage, courier and mail related expenses.


The amount of Postage stamps and other mailing expense

The amount of expense incurred for overnight or express delivery services

N/A

Comments: In addition to Postage stamps, the cost of replenishing Postage Meters, payment of Postage due amounts, the cost of Certified Mail, and any other related expense related to mail service is debited to this account.

This account also includes the cost of using express delivery services for overnight shipments.



37 Policy Adjustments


Purpose: The balance of this account represents the total cost of “goodwill” considerations given to customers by the dealership to promote customer satisfaction.


Repair costs which, in the interest of good customer relations, should not be charged to a customer

The amount of a warranty claim which is adjusted by the manufacturer / distributor

N/A

Comments: The Department which authorizes Policy Work should be charged the full amount of the expense. If more than one department agrees to accept the expense, then the expense should be pro-rated between departments.

Note: Policy Work authorized by the New or Used Vehicle Department is debited to Account 05, Policy Inspection.



38 Advertising


Purpose: The balance of this account represents the total amount spent to promote the dealership and the sale of its products (vehicles and parts) and services.


Monthly write – off of the expired portion of pre-paid advertising (e.g. billboards, yellow pages)

Classified advertising for personnel (Help Wanted)

Advertising expense that generally promotes or benefits the dealership as a whole (institutional)

At the time of sale, local advertising association fees which have been applied to New Vehicle invoices by Honda Canada Inc.

The cost of direct mail promotions including the cost of bulk mail postage

Any other advertising expense not covered by the above

The amount of Advertising Association Fees refunded to the dealership to assist with individual dealership advertising

The amount of Co-op Advertising to be reimbursed

Example 1: The dealership purchases a newspaper ad for the new vehicle department for the amount of $10,000 plus $700 for GST, which is eligible for Individual Dealer Co-op Advertising program support from HCI. To preserve the accounting principle of timing and matching, $10,000 is debited to Account 1238, (New Vehicle) Advertising. Since $5,000 is to be reimbursed, this amount is debited to Account 117, Accounts Receivables - Factory. The reimbursable amount is also posted as a credit to Account 1238. A claim for reimbursement of the Co-op Advertising support should be submitted on a timely basis. A credit of $10,700 is posted to Account 215, Trade Accounts Payable.

http://tsi-teamserver:46758/Application%20Data/Microsoft/Balance_Sheet/Assets/117_Accounts_Receivable_-_Factory.htm

http://tsi-teamserver:46758/Application%20Data/Microsoft/Balance_Sheet/Liabilities/215_Trade_Accounts_Payable.htm

http://tsi-teamserver:46758/Application%20Data/Microsoft/Balance_Sheet/Liabilities/215_Trade_Accounts_Payable.htm





1238 Advertising (New Vehicle)

$10,000


$700

117 Accounts Receivables - Factory

$5,000

1238 Advertising (New Vehicle)

$5,000

215 Trade Accounts Payable $10,700

Example 2: Record the credit of $5,000 (plus $350 GST) from HCI for reimbursement of the Co-op Advertising in the example above.




$5,000


$350

218 Factory Payable $5,350

Example 3: Record the purchase of a Fixed Operations direct mail advertising campaign, which qualifies for HCI Co-op reimbursement for the amount $6,000 and GST is $420. The total expense of $6,000 is pro-rated as follows: $4,000 to Service and $2,000 to Parts.



1438 Advertising (Parts) $2,000

1538 Advertising (Service) $4,000


$420


$3,000

1438 Advertising (Parts) $1,000

1538 Advertising (Service) $2,000

215 Trade Accounts Payable $6,420

Comments: In addition to the above, the following promotional expenses are posted to this account:

• Advertising Association Fees

• Yellow Pages

• Newspaper (Display Advertising)

• Billboards



• Radio-Television Advertising

• Promotional Efforts

The amount of Advertising Association Fees should be kept with the inventory value of the vehicle until the vehicle is sold. At the time of sale, the Advertising Association fees should be identified and debited to this account. This preserves the "timing and matching" of the advertising expense with the sale of the vehicle and provides a better framework for analysing the performance of the New Vehicle Department.

When only one department benefits from Advertising, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.

The cost of bulk mail for direct mail promotions such as service coupons, parts specials and new & used vehicle mailers should be charged to the department which benefits.



39 Donations


Purpose: The balance of this account represents the total amount given as a charitable donation to various charitable causes.


The amount to a donation to a charitable organization

• Churches and Other Religious Organizations

• Community Organizations

• Educational Institutions

• Hospitals and Other Medical Institutions

• Other Qualified Groups

N/A

Comments: When only one department sponsors a specific contribution, then the full amount of the expense should be charged to the respective department. If more than one department sponsors the donation, then the expense should be pro-rated between departments.



41 Company Vehicles


Purpose: The balance of this account represents the total cost to operate company owned vehicles and demonstrators.


The expenses related to operating and maintaining Company Vehicles and Demonstrators

• Gasoline

• Car Washes

• Detailing

• Required Maintenance

• Repairs

• Emission and Safety Inspections

• License, Registration and Title Fees

• Provincial and/or Local Usage Taxes

• Amortization of Company Vehicles

N/A

Comments: Please refer to Account 136, Demonstrators and Account 183, Company Vehicles for explanations of each category. Operating expenses including routine maintenance, repairs, fuel, car washes, detailing, vehicle registration fees and emission, safety inspections, and provincial / local usage taxes are debited to this account.

In addition, the monthly amortization is also debited. Professional tax and accounting advice should be obtained regarding the proper method of amortization applicable to Company Vehicles.

When only one department benefits from Company Vehicles, then the full amount of the expense should be charged to the respective department. For example, expenses related to maintaining a tow truck should be charged to the Service Department (1500). If more than one department benefits, then the expense should be pro-rated between departments.



42 Inventory Maintenance - Vehicle Department


Purpose: The balance of this account represents the total expense of recharging batteries, repairing tires, cleaning & polishing, washing vehicles in inventory.


The amount of expense incurred to maintain a vehicle for sale

• Wash and Detail expenses

• Maintenance of fluid levels and tire pressures

• Gasoline (fuel)

• Emission and Safety Inspection costs for Used Vehicles (not including repairs which should be considered as re-conditioning costs)

• Cost to recharge the battery

• Cost of supplies to maintain vehicles

• Cost of repair due to lot damage

N/A

Comments: Records should be kept regarding the Inventory Maintenance expenses for each vehicle. For routine service, repair orders should be completed for battery re-charging, and emission and safety inspections. Maintenance performed on used vehicles should be charged to the Used Vehicle Department (1300) and correspondingly, New Vehicle Maintenance is charged to the New Vehicle Department (1200).



44 Data Processing


Purpose: The balance of this account represents the total cost of providing computer data processing support for the dealership (excluding eBiz and Electronic parts catalogue fees accounted for in the SYST / MKTG Support stated on the new unit invoice).


The amount of lease or rental payments for data processing equipment

The cost of maintenance for data processing equipment

The amount of fees paid to computer service bureaus for data processing

The cost of data processing supplies

N/A

Comments: When only one department benefits from Data Processing, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



45 Training


Purpose: The balance of this account represents the total costs to provide Training for dealership employees (excluding Training fees accounted for in the SYST / MKTG Support stated on the new unit invoice).


The cost of attending training meetings for dealership employees

• Tuition

• Registration Fees

• Books and Materials

• Incidental Costs

The cost of travel and lodging while attending training meetings

• Airfare or other transportation costs

• Mileage reimbursement for use of personal vehicle

• Operating costs (gasoline) for using a company vehicle

• Hotel costs

• Meals

The compensation paid to employees while they are attending company sponsored training

The cost of purchasing training materials for use at the dealership

• Books

• Video and Audio Tapes

• Other instructional aids

N/A

Comments: When only one department benefits from Training, then the full amount of the Training expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



46 Travel - Entertainment


Purpose: The balance of this account represents the total expenses incurred for Travel on dealership business. This is separate from travel related expenses for employee training, which is recorded in Account 45, Training.


The cost of hotels, meals and entertainment while conducting business away from the dealer-ship

The cost of transportation to travel on business

• Airfare or other transportation costs

• Mileage reimbursement for use of personal vehicle

• Operating costs (gasoline, tolls, parking) for using a company vehicle

The cost or accrual of other employee recreational activities

• Holiday Parties

• Company Picnics

N/A

Comments: When only one department benefits from Travel & Entertainment, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.

Note: This account should not include the expense of travelling to and from the factory or other dealerships for the purpose of driving back new vehicles. Such expense should be charged to the appropriate new vehicle inventory account.



47 Telephone - Fax


Purpose: The balance of this account represents the total expense due to Telephone and Fax usage at the dealership.


The monthly service charges for phone, fax and computer lines

The monthly lease payments for the phone system or intercom system

The monthly accrual of telephone expense, if the phone bill is normally received after the month – end close (optional)

The amount of reimbursement to the dealership from individuals who have made personal long distance calls

The reversal of the previous monthly accrual

Comments: When only one department benefits from Telephone & Fax, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments. The pro-ration should be made on the basis of the number of phones, fax machines and computer lines installed.



48 Membership Dues & Subscriptions


Purpose: The balance of this account represents the total expense paid or incurred to join and support organizations related to the dealership.


The amount of membership fees or dues paid to civic and professional organizations

• CADA, Provincial and Local Associations

• Chamber of Commerce

• Other Business Groups

The cost of subscriptions for professional journals, magazines or other periodicals

The cost of required technical publications

• Shop Manuals

• Parts Catalogues

N/A

Comments: When only one department benefits from Membership Dues & Subscriptions, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



49 Freight - Express


Purpose: The balance of this account represents the total expense incurred to ship or receive goods at the dealership.


The Freight for shipping or receiving goods at the dealership

The amount collected from customers for Freight costs

Comments: When only one department benefits from Freight - Express, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



50 Outside Services


Purpose: The balance of this account represents the total cost to companies that provide services to the dealership.


The cost of services provided by outside companies except services defined in other accounts

• ISO 9001 consulting costs

• Trash Removal

• Security

• Parts Inventory Services

• Other Outside Vendors

N/A

Comments: When only one department benefits from Outside Services, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



51 Audit, Legal And Collection


Purpose: The balance of this account represents the total expense due to professional counsel from lawyers and accountants.


The monthly accrual of legal and accounting fees

Court costs and filing fees

Collection Agency Services

The amount of adjustment necessary to correct the accrual of this expense

Comments: When only one department benefits from Legal & Auditing Expense, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



52 Miscellaneous


Purpose: The balance of this account represents the total amount of miscellaneous expenses which cannot properly be recorded in any other expense category.


The amount of expense or the accrual of expenses which cannot be assigned to any other expense account

Flowers for special occasions

Overtime meals for employees

Small gifts which are not Donations to Charitable Organizations

The amount of reimbursement received by the dealership for previous expenses incurred

The reversal of a previous accrual

Comments: This account should only be used when an expense cannot be charged to any other account. Since the range of expense accounts is so comprehensive, this account should be used only on rare occasion. Whenever possible, the amount should be charged to the department requesting or benefiting from the expense. If two (2) or more departments are involved, then the expense should be pro-rated among the departments.



53 Interest & Bank Charges


Purpose: The balance of this account represents the total Interest that has been either paid or accrued on loans or various Bank Charges including credit card fees on customer purchases. This account does not include Floor Plan Interest or Interest on Mortgage Loans secured by real estate owned by the dealership.


The amount of Interest on loans

The amount of Bank Charges assessed on various services such as chequing accounts, stop payments, etc.

The amount of credit card fees related to customer purchases on charge cards

The amount of fees paid to cheque verification services

N/A

Comments: Each loan should be set up with a subsidiary ledger. As payments are made, the remaining principal and the interest paid should be reconciled with the statements received from the lending institution. Discrepancies should be resolved immediately. Only the interest should be debited to this account. Repayment of the principal is debited to Account 240, Notes Payable.

Various Bank Charges such as chequing account fees, stop payment fees, money order fees are also debited to this account.

General Interest & Bank Charges should be pro-rated to all departments unless a department is clearly responsible for incurring the expense.

When customers purchase goods and services with credit cards, the credit card fee is debited to this account. The amount of the credit card and cheque verification fees should be charged to the department responsible for the sale.



54 Floor Plan Interest


Purpose: The balance of this account represents the total expense paid or accrued as interest charges to floor New, Demonstrators and/or Used Vehicle inventories on short term notes.


The amount of Floor Plan Interest charges accrued or paid on short term notes which finance the New, Demonstrator and/or Used Vehicle Inventory

The amount of wholesale assistance funds received from Honda Canada Inc.

Comments: This account is established to record the interest accrued or paid on vehicles in inventory, which are financed on short term loans (floor plan) as follows:

Inventory recorded in Account 130, New Vehicles, floored on loans recorded in Account 205, Loans on New Vehicles.

Inventory recorded in Account 136, Demonstrators, floored on loans recorded in Account 208, Loans on Demonstrators.

Inventory recorded in Account 138, Used Vehicles, floored on loans recorded in Account 207, Loans on Used Vehicles.

As each vehicle, financed on short term loans (floor plan), is sold it should be paid off promptly to avoid excess interest charges and to abide by the terms and conditions of the original financing arrangements. Statements from the lending institution should be reconciled as they are received and discrepancies should be resolved immediately.

Expense Distribution: Each expense should be distributed to the New or Used Vehicle Department, respectively. For example, expenses related to flooring New Vehicle inventory should be charged to the New Vehicle Department (1200). Correspondingly, Used Vehicle floor plan interest should be charged to the Used Vehicle Department (1300).



60 Rent And/Or Mortgage Interest

Classification: Expenses – Fixed / Rent Factor

Purpose: The balance of this account represents the total expense for Rent or interest on Mortgage loans on real estate owned by the dealership and used for the automobile business.


The amount of monthly lease or rental payments for land or buildings used in the dealership operations

The amount of interest accrued or paid on Mortgage Loans secured by real estate used by the dealership for automotive purposes

The amount of any income received by subletting dealership facilities

Comments: Fixed Expenses should be allocated to all departments based on the amount of space each department occupies and the relative real estate value of the physical plant. When developing a plan to pro-rate fixed expenses, the fundamental question is: How much rent should be paid, if it were necessary to rent a showroom in a high traffic retail section of your market, for a used car lot on the main auto row, for a service facility in the most convenient part of town for your customers, or for a parts warehouse in an industrial park? Answering these questions will provide a practical basis to calculate the rent factor for each department.



61 Amortization of Leasehold Improvements


Purpose: The balance of this account represents the Amortization of Leasehold Improvements.


The monthly provision to Amortize Leasehold Improvements

N/A

Comments: This account is established to record the expensing of the monthly amortization of assets recorded in Account 172, Leasehold Improvements and the corresponding Accumulated Amortization posted to Account 173, Accumulated Amortization - Leasehold Improvements. Please refer to these accounts for additional detail.

The Amortization of Leasehold Improvements should be allocated to all departments based on the amount of space each department occupies and the relative real estate value of the physical plant. When developing a plan to pro-rate fixed expenses, the fundamental question is: How much rent should be paid, if it were necessary to rent a showroom in a high traffic retail section of your market, for a used car lot on the main auto row, for a service facility in the most convenient part of town for your customers, or for a parts warehouse in an industrial park? Answering these questions will provide a practical basis to calculate the rent factor for each department.

Professional tax and accounting advice should be obtained regarding the appropriate procedure of capitalizing leaseholds and calculating the correct method of amortization allowed under current tax laws.



62 Property Maintenance


Purpose: The balance of this account represents the total expense for facility maintenance.


The cost of repairs for the dealership facility (either owned or leased)

The cost of Landscaping and Gardening and the resulting monthly maintenance

The cost of snow removal

N/A

Comments: Property Maintenance Expenses should be allocated to all departments based on the amount of space each department occupies and the relative real estate value of the physical plant. When developing a plan to pro-rate fixed expenses, the fundamental question is: How much rent should be paid, if it were necessary to rent a showroom in a high traffic retail section of your market, for a used car lot on the main auto row, for a service facility in the most convenient part of town for your customers, or for a parts warehouse in an industrial park? Answering these questions will provide a practical basis to calculate the rent factor for each department.



63 Property Taxes


Purpose: The balance of this account represents the total amount of real estate tax that has been paid or accrued.


The monthly provision of real estate taxes on property used by the dealership

The amount of adjustment required to increase the account balance when there has been an under - provision of monthly accruals

The amount of adjustment required to reduce the account balance when there has been an over - provision of monthly accruals

Comments: Property Taxes should be allocated to all departments based on the same rationale as Rent. The distribution of this expense should take into consideration the amount of space each department occupies and the relative real estate value of the physical plant. When developing a plan to pro-rate fixed expenses, the fundamental question is: How much rent should be paid, if it were necessary to rent a showroom in a high traffic retail section of your market, for a used car lot on the main auto row, for a service facility in the most convenient part of town for your customers, or for a parts warehouse in an industrial park? Answering these questions will provide a practical basis to calculate the rent factor for each department.

Professional tax and accounting advice should be obtained regarding the proper handling and payment of Property Taxes, observing changes in assessed valuation and due dates.



64 Building Insurance


Purpose: The balance of this account represents the total cost of insurance premiums to cover the dealership facility.


The monthly provision for Buildings & Improvements insurance premiums for the dealership facility

• Fire

• Theft

• Comprehensive

• Damage Due to Flood, Wind, Earthquake

• Extended Coverage

N/A

Comments: Typically insurance coverage requires a pre-payment of insurance premiums in order for the policy to take effect. Building Insurance usually fits this category. Please refer to Account 156, Prepaid Insurance for additional details.

Building Insurance and other Fixed Expenses should be allocated to all departments based on the amount of space each department occupies and the relative real estate value of the physical plant. When developing a plan to pro-rate fixed expenses, the fundamental question is: How much rent should be paid, if it were necessary to rent a showroom in a high traffic retail section of your market, for a used car lot on the main auto row, for a service facility in the most convenient part of town for your customers, or for a parts warehouse in an industrial park? Answering these questions will provide a practical basis to calculate the rent factor for each department.



65 Building Amortization


Purpose: The balance of this account represents the total expense due to Amortization of the dealership facility.


The monthly portion of dealership Building Amortization absorbed in the current fiscal year. Tax regulations dictate proper rates of capital cost allowance for each class of assets

Capital cost allowance rates for tax purposes may not be the same rates used to amortize assets for accounting purposes. (See Account 247 Deferred Taxes).

N/A

Comments: The monthly provision for expensing Building Amortization as set forth in Account, 168, Accumulated Amortization - Buildings is debited to this account. For additional details, please refer to Account 167, Buildings and Account 168, Accumulated Amortization - Buildings.

The amortization of the Building and other Fixed Expenses should be allocated to all departments based on the amount of space each department occupies and the relative real estate value of the physical plant. When developing a plan to pro-rate fixed expenses, the fundamental question is: How much rent should be paid, if it were necessary to rent a showroom in a high traffic retail section of your market, for a used car lot on the main auto row, for a service facility in the most convenient part of town for your customers, or for a parts warehouse in an industrial park? Answering these questions will provide a practical basis to calculate the rent factor for each department.

Professional tax and accounting advice should be obtained regarding the appropriate procedure of capitalizing fixed assets and calculating the correct method of amortization allowed under current tax laws.



68 Business And Other Taxes

Classification: Expenses – Other Fixed

Purpose: The balance of this account represents the total taxes other than Payroll, Real Estate and Income Taxes. Subsidiary records should be set up for each category.


The amount of all other taxes paid or payable except Payroll, Real Estate and Income Taxes

• Provincial Capital Tax

• Municipal Business Tax Assessment

• Gross Receipt Taxes

• Business Licenses

• Fees paid to governmental agencies for filing documents (building permits, zoning variances, etc.)

N/A

Comments: Each item of this expense should be distributed to operating departments to the extent applicable, as indicated by the departments incurring of such taxes.

Professional tax and accounting advice should be obtained regarding the proper handling and payment of Business and Other Taxes.



69 Amortization - Equipment and Fixtures


Purpose: The balance of this account represents the total expenses due to amortization of Equipment and Fixtures other than real estate.


The monthly provision to amortize fixed assets such as

• Computer Equipment

• Machinery and Shop Equipment

• Parts & Accessories Equipment

• Furniture & Fixtures

The amount of adjustment required to increase the account balance when there has been an under - provision of monthly accrual


Comments: When only one department benefits from a given Fixed Asset (e.g. Parts & Accessories Equipment with respect to the Parts & Accessories Department), then the full amount of the amortization should be charged to the respective department. If more than one department benefits, then the amortization expense should be pro-rated between departments.

Professional tax and accounting advice should be obtained regarding proper establishment of amortization rates and schedules.



70 General Insurance


Purpose: The balance of this account represents the total monthly provision for various insurance premiums for policies that cover the dealership.


The monthly provision of the cost of insurance premiums paid or accrued for various policies such as

• Fire and Theft

• Garage Liability

• Merchandise Inventories

• Contents and Equipment

• Fidelity Bonds - Employees

• Business Interruption

N/A

Comments: Typically insurance coverage requires a pre-payment of insurance premiums in order for the policy to take effect. The policies above usually fit this category. Please refer to Account 156, Prepaid Insurance for additional details.

General Insurance and other Fixed Expenses should be allocated to all departments based on the amount of space each department occupies and the relative real estate value of the physical plant. When developing a plan to pro-rate fixed expenses, the fundamental question is: How much rent should be paid, if it were necessary to rent a showroom in a high traffic retail section of your market, for a used car lot on the main auto row, for a service facility in the most convenient part of town for your customers, for a parts warehouse in an industrial park? Answering these questions will provide a practical basis to calculate the rent factor for each department.



73 Maintenance of Equipment


Purpose: The balance of this account represents the total expenses incurred to keep dealership equipment in proper working order.


The cost of repairs or maintenance performed on dealership equipment

The monthly provision to write off the cost of a service contract covering dealership equipment unless previously expensed

The deductible portion of service contract repairs

N/A

Comments: This account is established to record the expense of repairing or maintaining dealership equipment. If repair work is performed by productive dealership employees (Service Technicians), a Repair Order should be prepared to keep track of time and materials.

When only one department benefits from Equipment Repair, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



74 Heat, Light, Power And Water


Purpose: The balance of this account represents the total cost of Heating, Power and Water expense for the dealership.


The payment or accrual of monthly costs for the following

• Oil and other Fuel used for Heating

• Natural Gas

• Electric Power

• Water

N/A

Comments: Heat, Light, Power and Water and other Fixed Expenses should be allocated to all departments based on the amount of space each department occupies and the relative real estate value of the physical plant. When developing a plan to pro-rate fixed expenses, the fundamental question is: How much rent should be paid, if it were necessary to rent a showroom in a high traffic retail section of your market, for a used car lot on the main auto row, for a service facility in the most convenient part of town for your customers, or for a parts warehouse in an industrial park? Answering these questions will provide a practical basis to calculate the rent factor for each department.



75 Equipment Rental


Purpose: The balance of this account represents the total cost of renting equipment for the dealership.


The total cost of renting or leasing equipment

• Office Machines (excluding computers)

• Postage Meters

• Furniture Rental

• Brand Signs

N/A

Comments: When only one department benefits from an Equipment Rental, then the full amount of the expense should be charged to the respective department. If more than one department benefits, then the expense should be pro-rated between departments.



78 Amortization of Deferred Charges and Intangibles


Purpose: The balance of this account represents the total expenses due to amortization of Deferred Charges and Intangibles.


The monthly provision to amortize other assets such as

• Deferred charges

• Goodwill

The amount of adjustment required to increase the account balance when there has been an under - provision of monthly accrual


Comments: When only one department benefits from a given charge, then the full amount of the amortization should be charged to the respective department. If more than one department benefits, then the amortization expense should be pro-rated between departments.



80 Licenses (Company Only)


Purpose: The balance of this account represents the total expense for required business Licenses.


The cost of required business licenses such as, but not limited to:

• Garage License

• Gasoline Handling License

• Registration Fees on Lien Notes

• Driver’s License Searches

• Salespersons’ Registration Fees, Where Applicable

N/A

Comments: Subsidiary records should be established for each license with the renewal date and payment deadline detailed. Licenses should be renewed on time in order to avoid late fees and penalties or the possible suspension of business while waiting for renewal.

Whenever possible, the expense of licenses should be charged to the department which benefits. If the license applies to the entire dealership, then the expense should be pro-rated to each department in a similar manner as Rent and Other Fixed Expenses.



90 Marketing Allowance for New Vehicles Sold

Classification: Adjustments

Purpose: The balance of this account represents the amount of Marketing Allowance or Marketing Support associated with new vehicles, which have been sold and delivered to customers.


N/A

The amount of Marketing Allowance for each new vehicle sold

The amount of Marketing Support for each new vehicle sold

Example: Record the sale of the new vehicle above for $21,000, the G.S.T. is $1,470, the Provincial Sales Tax is $1,680, and the Vehicle License is $100. There is no trade and the customer has previously paid $6,000 as a cash down payment and finances $18,150. The Finance reserve is $350.







$20,000

130 New Vehicles (Inventory)

$20,000

1238 Advertising (New Vehicles)

$150


$150


$300


$300


$1,470



110 Vehicle Licenses Clearing

$100



$18,150



$350

Comments: This account is established to record the amount of Marketing Allowance or Marketing Support, which matches the new vehicles as they are sold.

When each vehicle is sold, the respective Marketing Allowance or Marketing Support amount is credited to this Account.



91 Acura Concierge / AAFP Fund


Purpose: The balance of this account represents the amount of Acura Concierge / AAFP Fund associated with new vehicles, which have been sold and delivered to customers.


N/A

The amount of Acura Concierge / AAFP Fund for each new vehicle sold



99 Bonuses - Owners


Purpose: The balance of this account represents the total expense set aside to pay bonuses to owners or officers.


The monthly provision set side to pay bonuses to owners or officers

N/A

Comments: Professional tax and accounting advice should be obtained regarding payment of bonuses. Tax implications for the dealership and the owners and/or officers should be considered in this matter.


Revised January 2015 F-1

F- OTHER INCOME AND DEDUCTIONS



701 Contract Reserves- New

Classification: Sales - Finance and Insurance Department

Purpose: The balance of this account represents the amount of reserve payments and commission earned from lending institutions and insurance companies for the sale of finance contracts, leases and various insurance policies related to new vehicle sales.


N/A

The amount of Finance Income (reserve payments and commissions) earned through the sale of finance contracts, leases and insurance policies

Comments: Reserve payments and commissions typically do not have a cost of sale. Finance Income earned should be recorded on a subsidiary record. Income from Finance Contracts and Leases should be further differentiated due to the fact that Lease reserve payments are subject to G.S.T. (and, in Quebec, subject to P.S.T. as well). When notification is received from lending institutions or insurance companies detailing the amount of payment, it should be verified with respect to the original entry. Discrepancies should be resolved immediately.



702 Extended Warranty Income- New


Purpose: The balance of this account represents the total sales amount of Acura Plus and service contracts in general sold to customers on New Acura vehicles.


N/A

The selling price of Acura Plus and other service contracts sold to customers on New Acura vehicles



752 Extended Warranty Income- New

Classification: Cost of Sales - Finance and Insurance Department

Purpose: The balance of this account represents the total cost of Acura Plus and other service contracts sold to customers on New Acura vehicles.


The cost of Acura Plus and other service contracts sold to customers

N/A

Comments: As Acura Plus and other service contracts are sold to New Vehicle Customers, the amount of the selling price is credited to the Sales Account 702, Extended Warranty Income-New. The cost of the contract, which will be remitted to the underwriter of the contract, is debited to the Cost of Sales Account 752, Extended Warranty Income-New. If the contract is an Acura Plus contract, a payable should be set up and the credit posted to a sub-account of Account 218, Factory Payable. If the contract is underwritten by an independent company, the payable should be set up and credited to Account 215, Trade Accounts Payable. The G.S.T. on the cost of the contract is broken out and debited to Account 219(A), Goods & Service Tax - Input Tax Credit. Special care should be taken to observe the terms and conditions set forth by independent service contract companies. Professional accounting and legal advice should be obtained regarding any liabilities for which, the dealership may ultimately be responsible.



703 – Acura Product Including Insurance


Purpose: The balance of this account represents the total sales amount of after sale items sold on New Vehicles.


N/A

The selling price of aftermarket items sold on New Vehicles such as chemical treatments, rust inhibitor, fabric protection, etc.



753 –Acura Product Inc. Insurance


Purpose: The balance of this account represents the total cost of after sale items sold on New Vehicles.


The cost of aftermarket items (above) sold on New Vehicles

N/A

Comments: After sale items are opportunities for the F & I department to provide value added services to New Vehicle customers. In addition to arranging financing, selling Other Merchandise is a convenience for customers who may otherwise use their own time to have their new vehicle treated with rust-inhibitor and accessorized independently. The selling price of Other Merchandise is credited to Account 703, Acura Product Including Insurance. The cost of sales is debited to Account 753, Acura Product Including Insurance.



704 – Non-Acura Product Including insurance


Purpose: The balance of this account represents the total sales amount of after sale Non-Acura items sold on New Vehicles.


N/A

The selling price of aftermarket items sold on New Vehicles such as

Lease Ancillary Package

Lease Image Guard

Tire and Rim

Dent and Ding

Windshield

Rip, Tear, Burn

Key Fob Replacement

Appearance Protection

Paint Protection

Fabric Protection

Corrosion Protection Retail Ancillary Package

Life & Disability

Critical Illness

GAP

Loss of Employment



754 – Non-Acura Product Including insurance


Purpose: The balance of this account represents the total sales amount of after sale Non-Acura items sold on New Vehicles.


The cost of aftermarket items (above) sold on New Vehicles

N/A

Comments: After sale items are opportunities for the F & I department to provide value added services to New Vehicle customers. The selling price of Non-Acura Product is credited to Account 704, Non-Acura Product Including Insurance (Sales). The cost of sales is debited to Account 754, Non-Acura Product Including Insurance (Cost of Sales).



705 Repossession Losses and Charge Backs - New


Purpose: The balance of this account represents the net Charge Backs from lending institutions due to early termination of finance contracts, cancellation of service contracts, extended warranties including Acura Plus or in the case of Repossessions, the loss incurred when a vehicle is repossessed.


The amount charged back (if any) to the dealership by financial institutions when a finance contract is paid off before the contract matures

The amount charged back (if any) to the dealership by service contract underwriters when a service contract is terminated before it expires

The amount of loss incurred by the dealership when a New Vehicle is repossessed by a lending institution and the market value ACV is lower than the balance of the loan

N/A

Comments: This account is a cost of sales account.

From time to time a customer may trade in a vehicle before the loan is paid in its entirety. Normally, the lending institution will pro-rate and Charge Back the portion of the finance reserve that represents the unused or remaining part of the loan. When a Charge Back notice is received, it should be verified with the lending institution and credited to this account. Typically, the lending institution will keep a contingency reserve of funds (recorded in Account 196, Finance Company Participation) owed to the dealership on outstanding finance contracts depending on the terms and conditions of agreement with the respective lending institution. The amount of the Charge Back is credited to this account (Account 196, Finance Company Participation). If the Finance Company Participation is less than the Charge



Back, then a cheque is drawn for the amount due and credited to Account 104, Bank Accounts.

Similarly, when a customer cancels a Service Contract or Extended Warranty, the underwriter typically charges back the pro-rated profit on the portion which is cancelled. Again, when a Charge Back notice is received, it should be verified with the Service Contract underwriter (to check for errors) and credited to this account. Normally, a cheque is prepared to pay the Charge Back and when this is done, Account 104, Bank Accounts, is credited for the amount of the Charge Back.

As far as Repossessions are concerned, if the dealership elects not to set up a reserve in Account 256, Provision for Repossessions, then this account may be used to record any losses due to Repossession. If the dealership has responsibility for absorbing Repossession (recourse finance contract) Losses, then any loss incurred on a repossessed vehicle is debited to this account. This occurs when the repossessed vehicle has an ACV lower than the market value of the vehicle. The vehicle should be placed into Used Vehicle Inventory by debiting Account 138, Used Vehicles, at the ACV. The balance of the loan is paid off by cheque and Account 104, Bank Account, is credited. The loss is credited to this account. In the event that no loss is incurred, the customer may be due a refund. Professional tax and accounting advice should be obtained regarding the proper handling of Repossession refunds to customers and obligations that the dealership may incur.



706 Finance Income - Used


Purpose: The balance of this account represents the amount of reserve payments and commission earned from lending institutions and insurance companies for the sale of finance contracts or leases and various insurance policies related to used or pre-owned vehicle sales.


N/A

The amount of Finance Income (reserve payments and commissions) earned through the sale of finance contracts or leases and insurance policies

Comments: Reserve payments and commissions typically do not have a cost of sale. Finance Income earned should be recorded on a subsidiary record. Income from Finance Contracts and Leases should be further differentiated due to the fact that Lease reserve payments are subject to G.S.T. (see Account 701, Contract Reserves - New ). When notification is received from lending institutions or insurance companies detailing the amount of payment, it should be verified with respect to the original entry. Discrepancies should be resolved immediately.



707 Protection Plan Income - Used


Purpose: The balance of this account represents the total sales amount of Acura Plus, Certification fees and service contracts in general sold to customers on Used Vehicles.


N/A The selling price of Acura Plus, Certification fees and other service contracts sold to customers on Used Vehicles



757 Protection Plan Income - Used


Purpose: The balance of this account represents the total cost of Acura Plus, certification fees and other service contracts sold to customers on Used Vehicles.


The cost of Acura Plus, Certification fees and other service contracts sold to customers

N/A

Comments: As Acura Plus, certification fees and other service contracts are sold to Used Vehicle Customers, the amount of the selling price is credited to the Sales Account 707, Protection Plan Income - Used (Sales). The cost of the contract, which will be remitted to the underwriter of the contract, is debited to the Cost of Sales Account 757, Protection Plan Income - Used (Cost of Sales). If the contract is an Acura Plus contract, a payable should be set up and the credit posted to Account 218, Factory Payable. If the contract is underwritten by an independent company, the payable should be set up and credited to Account 215, Trade Accounts Payable. The G.S.T. on the cost of the contract is broken out and debited to Account 219(A), Goods & Service Tax - Input Tax Credit. Special care should be taken to observe the terms and conditions set forth by independent service contract companies. Professional accounting and legal advice should be obtained regarding any liabilities for which, the dealership may ultimately be responsible.



708 Other Merchandise – Used


Purpose: The balance of this account represents the total sales amount of after sale items sold on Used Vehicles


N/A The selling price of aftermarket items sold on Used Vehicles such as chemical treatments, rust inhibitor, fabric protection, etc.



758 Other Merchandise – Used


Purpose: The balance of this account represents the total cost of after sale items sold on Used Vehicles.


The cost of aftermarket items (above) sold on Used Vehicles

N/A

Comments: After sale items are opportunities for the F & I department to provide value added services to New Vehicle customers. In addition to arranging financing, selling Other Merchandise is a convenience for customers who may otherwise use their own time to have their new vehicle treated with rust-inhibitor and accessorized independently. The selling price of Other Merchandise is credited to Account 708, Other Merchandise – Used (Sales) The cost of sales is debited to Account 758, Other Merchandise – Used (Cost of Sales).



709 Repossession Losses and Charge Backs - Used


Purpose: The balance of this account represents the net Charge Backs from lending institutions due to early termination of finance contracts, cancellation of service contracts, Extended Warranties including Acura Plus or in the case of Repossessions, the loss incurred when a vehicle is repossessed.


The amount charged back (if any) to the dealership by financial institutions when a finance contract is paid off before the contract matures

The amount charged back (if any) to the dealership by service contract underwriters when a service contract is terminated before it expires

The amount of loss incurred by the dealership when a New Vehicle is repossessed by a lending institution and the market value ACV is lower than the balance of the loan

N/A

Comments: This account is cost of sales account.

From time to time a customer may trade in a vehicle before the loan is paid in its entirety. Normally, the lending institution will pro-rate and Charge Back the portion of the finance reserve that represents the unused or remaining part of the loan. When a Charge Back notice is received, it should be verified with the lending institution and credited to this account. Typically, the lending institution will keep a contingency reserve of funds (recorded in Account 196, Finance Company Participation) owed to the dealership on outstanding finance contracts depending on the terms and conditions of the original agreement with the respective lending institution. The amount of the Charge Back is credited to this account (Account 196, Finance Company Participation). If the Finance Company Participation is



less than the Charge Back, then a cheque is drawn for the amount due and credited to Account 104, Bank Accounts.

Similarly, when a customer cancels a Service Contract or Extended Warranty, the underwriter typically charges back the pro-rated profit on the portion which is cancelled. Again, when a Charge Back notice is received, it should be verified with the Service Contract underwriter (to check for errors) and credited to this account. Normally, a cheque is prepared to pay the Charge Back and when this is done, Account 104, Bank Accounts, is credited for the amount of the Charge Back.

As far as Repossessions are concerned, if the dealership elects not to set up a reserve in Account 256, Provision for Repossessions, then this account may be used to record any losses due to Repossession. If the dealership has responsibility for absorbing Repossession (recourse finance contract) Losses, then any loss incurred on a repossessed vehicle is debited to this account. This occurs when the repossessed vehicle has an ACV lower than the market value of the vehicle. The vehicle should be placed into Used Vehicle Inventory by debiting Account 138, Used Vehicles, at the ACV. The balance of the loan is paid off by cheque and Account 104, Bank Account, is credited. The loss is credited to this account. In the event that no loss is incurred, the customer may be due a refund. Professional tax and accounting advice should be obtained regarding the proper handling of Repossession refunds to customers and obligations that the dealership may incur.



801 Cash Discount Earned

Classification: Other Income

Purpose: The balance of this account represents the amount of discounts offered by suppliers for prompt payment of invoices and statements.


N/A

The amount of Cash Discount allowed by suppliers for prompt payment within the time specified by the supplier

Comments: As a matter of good business practice, it is always advisable to take advantage of Cash Discounts offer by suppliers for prompt payment. Since the Cash Discount does not affect the value of the goods or services provided, the goods or services should be booked at full value and the Cash Discount recorded in this account.



802 Interest Earned


Purpose: The balance of this account represents Interest Earned on savings accounts, accounts receivable or loans held by the dealership.


The amount of interest due from customers for non-payment, but forgiven by the dealership as a gesture of goodwill

The amount of Interest Earned on interest bearing bank account, late payments of Accounts Receivable, or loans granted by the dealership

Comments: When interest is earned, the amount of Interest Earned is credited to this account.



804 Bad Debts Collected


Purpose: The balance of this account represents the amount of payments received on receivable accounts which had previously been "written off" as a Bad Debt.


N/A

The amounts recovered from previously written off Accounts Receivable

Comments: Just because an old receivable has been written off, it should not be forgotten. Collection efforts must be made on all outstanding accounts owed to the dealership. When payment is received on an account that had been previously written off as a "Bad Debt", the amount of the payment is credited to this account. The offsetting debit is posted to Account 104, Bank Accounts.



806 Compensation Earned - Sales Tax


Purpose: The balance of this account represents the compensation earned by the dealership for collecting Provincial Sales Taxes.


N/A The amount of compensation earned regarding the collection of Provincial Sales Tax

Comments: Professional tax and accounting advice should be obtained regarding P.S.T. Compensation due to the fact that reporting periods and the maximum amount of compensation allowed varies by Province.



810 Miscellaneous


Purpose: The balance of this account represents all miscellaneous income, which cannot be properly recorded in any other account.


The amount of an adjustment or a reversal of a previous entry

The amount of gain as result of a dealer trade (new vehicle)

The amount of sundry income that cannot be properly recorded in any other account

Example: Record the revenue resulting from vending machine sales in the customer waiting area. The amount is $225.



102 Cash on Hand $225

810 Miscellaneous $225

Comments: On rare occasion, income may be received from sources unrelated to the dealership's automobile business. For example, suppose the dealership owns real estate, which is vacant and is able to rent the property to a tenant conducting another form of business. The rent from the property is miscellaneous income and should be recorded in this account.

Account 90, Marketing Allowance for New Vehicles Sold.

http://tsi-teamserver:46758/Desktop/Expenses/90_Marketing_Allowance_for_New_Vehicles_Sold.htm



853 Cash Discount Allowed

Classification: Other Deductions

Purpose: The balance of this account represents Cash Discounts Allowed to customers for prompt payment of amounts due to the dealership.


The amount of discounts provided to customers for cash and or prompt payment

N/A

Comments: When a Cash Discount is offered to a customer, it should be clearly stated that the amount is payable in full by a certain due date in order for the Cash Discount to granted. Payments should be checked with respect to the due date in order to make sure that the discount is earned.

The invoice should show the full amount due, the amount of the Cash Discount and the terms (due date). The payment should be booked at the full amount with respect to the receivable and the Cash Discount should be debited to this account.



854 Bad Debt Expense


Purpose: The balance of this account represents the total amount of Bad Debts.


The amount of receivables deemed to be uncollectible and/or written-off

N/A

Comments: Professional tax and accounting advice should be obtained regarding the proper handling of Bad Debt Expense and the write-off of uncollectible receivables. Please see the Comments in Account, 115 Accounts Receivable - Customer Service, Parts, Body Shop and Account 125, Allowance for Doubtful Accounts.



856 Director's Fees


Purpose: This account is only for use by dealerships which are corporations. The balance of this account represents the amount of fees paid to members of the Board of Directors.


The amount of fees paid to Director(s) of an incorporated company, according to provisions in the Articles of Incorporation

N/A

Comments: Members of the Board of Directors may be entitled to compensation for their services depending on the Articles of Incorporation and any subsequent change authorized by the Board. The amount of fees paid is debited to this account.



860 Miscellaneous


Purpose: The balance of this account represents expenses incurred by the dealership for matters which cannot be properly recorded in any other account and are unrelated to the automobile business.


Any loss resulting from a dealer transfer (new vehicle)

The amount of Miscellaneous expense

Loss from the sale of Investments

Loss from the sale of Fixed Assets

Moving Expenses

Casualty Losses

Adjustment for Cash Shortages

N/A

Comments: Professional tax and accounting advice should be obtained regarding the calculation of losses on the sale of investments and fixed assets.


Revised January 2015 F-i

Index

A

Absentee 480 Unapplied Time, Service ............................................................................ D-53 481 Unapplied Time, Body & Paint ................................................................... D-54 Expense Distribution .......................................................................................... E-2

Absentee & Vacation pay ..................................................................................... E-16 Absorbing

705 Repossession Losses and Charge Backs - New.......................................... F-7 709 Repossession Losses and Charge Backs - Used ...................................... F-12

Absorption ............................................................................................................. 5, 6 Accessories

144 Accessories – Acura .................................................................................. A-34 144 Parts – Acura ............................................................................................. A-33 145 Accessories - Other .................................................................................. A-36 145 Parts - Other .............................................................................................. A-35 218 Factory Payable ........................................................................................ B-14 350, 450 Parts Wholesale ................................................................................ D-13 359, 459 Accessories – Acura .......................................................................... D-21 359, 459 Accessories – Other .......................................................................... D-23 367, 467 Miscellaneous .................................................................................... D-27 37 Policy Adjustments Parts & Service ............................................................. E-26 463 Parts Discount Earned ............................................................................... D-51 464 Parts Inventory Adjustment ........................................................................ D-52 level ........................................................................................................ D-21, D-23 monitoring .............................................................................................. D-21, D-23 value ...................................................................................................... D-21, D-23

Accessories Department ...................................................................................... E-51 Accessories Equipment ........................................................................................ A-57 Accessory Inventory ............................................................................................. D-52 Accident ............................................................................................................... A-76 Accord Coupe ........................................................................................................ D-2 Accord Hybrid......................................................................................................... D-2 Accord Sedan......................................................................................................... D-2 According

136 Demonstrators ........................................................................................... A-25 139 Courtesy Vehicles – Inventory ................................................................... A-28 140 Daily Rental Vehicles ................................................................................. A-31 183 Company Vehicles ..................................................................................... A-63 Honda

136 Demonstrators ....................................................................................... A-25 139 Courtesy Vehicles – Inventory ............................................................... A-28 140 Daily Rental Vehicles ............................................................................. A-31 183 Company Vehicles ................................................................................. A-63

Accounts Receivable 115 Accounts Receivable Customer Service, Parts, Body Shop ....................... A-10 116 Accounts Receivable Vehicles ................................................................... A-12 117 Accounts Receivable Factory .................................................................... A-13 119 Lease Receivable ...................................................................................... A-14 120 Warranty Claims ........................................................................................ A-15 121 Marketing Allowance Receivable ............................................................... A-16 122 Goods and Services Tax Receivable ......................................................... A-18


Revised January 2015 F-ii

123 Finance And Insurance Commissions ........................................................ A-20 192 Advances .................................................................................................. A-73 802 Interest Earned .......................................................................................... F-15 804 Bad Debts Collected .................................................................................. F-16 854 Bad Debts Expense ................................................................................... F-20 Allowance for Doubtful Accounts ...................................................................... A-10 Customer Service, Parts, Body Shop ...................................................... A-73, F-20

Accumulated Amortization .................................................................................... A-54 Accumulated Depreciation

168 Depreciation – Buildings ............................................................................ A-48 1691 Depreciation – EDP Equipment ............................................................... A-50 171 Depreciation – Building Fixtures ................................................................ A-52 175 Depreciation – Office Equipment ............................................................... A-56 177 Depreciation – Parts Equipment ................................................................ A-58 179 Depreciation – Service Department Equipment ......................................... A-60 182 Depreciation – Signs ................................................................................. A-62

Active Customers in File ............................................................................................ 5 Allowance for Doubtful Accounts

125 Allowance For Doubtful Accounts .............................................................. A-21 854 Bad Debts Expense ................................................................................... F-20

Average Technician Hourly Wage ............................................................................. 4

B

Bank Accounts ........................................................................... A-4, A-18, A-19, A-74 Bays .......................................................................................................................... 5 Breakeven ................................................................................................................. 5

C

Cash on Hand ............................................................................................... A-3, F-18 Cash Sales Clearing................... A-8, A-17, A-23, B-18, B-29, D-17, D-30, D-45, E-59 Civic Coupe ............................................................................................................ D-2 Civic Hybrid ............................................................................................................ D-2 Civic Sedan ............................................................................................................ D-2 Civic SiR / Fit.......................................................................................................... D-2 Compensation ........................................................................................................ E-8 Contribution PNVS .................................................................................................... 5 CR-V ...................................................................................................................... D-2

D

Dealership Receivables ............................................................................................. 3 Distribution of Personnel ........................................................................................... 3

E

Element .................................................................................................................. D-2

F

Finance Contracts In Transit .................................................................................. A-6 Fixed Gross Profit ..................................................................................................... 6

I

Inventory analysis ................................................................................................................. 3


Revised January 2015 F-iii

L

Labour body & paint

cost of sales customer RO ............................................................................................ D-32 internal ...................................................................................................... D-35 sublet repairs ............................................................................................ D-41 supplies .................................................................................................... D-42 warranty .................................................................................................... D-39

sales customer RO ............................................................................................ D-32 internal ...................................................................................................... D-35 sublet repairs ............................................................................................ D-41 supplies .................................................................................................... D-42 warranty .................................................................................................... D-39

rates customer ........................................................................................................... 5 internal .............................................................................................................. 5 warranty ............................................................................................................ 5

service cost of sales

customer RO ............................................................................................ D-29 internal ...................................................................................................... D-34 LOF/Express ............................................................................................. D-38 P.D.I. ........................................................................................................ D-36 sublet repairs ............................................................................................ D-40 warranty .................................................................................................... D-33

sales customer RO ............................................................................................ D-29 internal ...................................................................................................... D-34 LOF/Express ............................................................................................. D-38 P.D.I. ........................................................................................................ D-36 sublet repairs ............................................................................................ D-40 warranty .................................................................................................... D-33

M

Management operating information ........................................................................... 3 Marketable Securities ................................................................................... A-7, A-70 Monthly routine .......................................................................................................... 2

N

New, used vehicle inventory analysis ........................................................................ 3

O

Odyssey ................................................................................................................. D-2 Other Income and Deductions ............................................................................ 6, F-1

P

Personnel distribution ............................................................................................................. 3

Petty Cash .......................................................................................... 2, A-2, A-3, A-8 Pilot ........................................................................................................................ D-2


Revised January 2015 F-iv

R

R.O. Customer ............................................................................................................... 4 Total ...................................................................................................................... 4

Repossession 705 Repossession Losses and Charge Backs - New.......................................... F-7 709 Repossession Losses and Charge Backs - Used ...................................... F-12

Ridgeline ................................................................................................................ D-2

S

S2000 .................................................................................................................... D-2 Service

service department data ........................................................................................ 4 Service department data ........................................................................................... 4 Service Potential ....................................................................................................... 5

T

Time Available................................................................................................................ 4 Charged Out .......................................................................................................... 4 Clocked R.O. ......................................................................................................... 4

Total Fixed Overhead ................................................................................................ 6 Trust Account ................................................................................................. A-3, A-5

U

Unabsorbed Overhead .............................................................................................. 6 Unit Breakeven .......................................................................................................... 6

V

Variable Gross Profit ................................................................................................. 5 Variable Sales Profit .................................................................................................. 5 Variable Selling Expenses ......................................................................................... 5 Vehicle Licenses Clearing ................................................ A-9, A-17, A-23, B-29, E-59 Vehicles Sales Personnel ....................................................................................... E-8

acura dealer standard accounting manual dealer standard accounting manual revised january 2018...

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