The following proscribes a process for managing a tradein where the tradein unit being purchased has negative equity.

Worked Example

• Buying a new Suzuki for $15000 + GST + ORC (Victoria demoed below)
• Trading in a Honda for $3000 +GST (intend to resell for 3500)
• Honda has finance owing of $4000

Process summary

1. Sale with tradein
2. Add the honda. (tradein)
   1. Set buy price to $3000
   2. Add line item, encumbrance for $4000
   3. Set resale to 3500
   4. Add write back equal to value of money you plan to take from customer for purposes of covering part/all of the liability. i.e. $4000.
3. Add the Suuzki (suzuki)
   1. Add sell price of $15000
   2. Add a non dutyable invoice item, tradein disposal, set encumbrance for amount you want to try to recover for taking on the liability. i.e. Generally want this to be 100%, $4000. Set cost of this at $0, since it costs you nothing, at this point in time, to take this money.

Illustrating

Purchase:

Sale:

Resulting tax invoices

Resulting posted General Ledger

GL Posting for sale + tradein

 posting | glcode |              name               |    DR    |    CR    
---------+--------+---------------------------------+----------+----------
    1186 | 1-1001 | Instrument #1                   |   420.00 |         
    1186 | 1-1001 | Instrument #1                   |    15.00 |         
    1186 | 1-1001 | Instrument #1                   | 17765.00 |         
    1186 | 1-1001 | Instrument #1                   |    36.70 |         
    1186 | 1-3201 | Pending GST on non-abn purchase |   300.00 |         
    1186 | 1-5100 | Units in stock                  |          |  7620.21
    1186 | 1-5100 | Units in stock                  |  3000.00 |         
    1186 | 2-2200 | GST Clearing                    |          |  1915.00
    1186 | 2-5000 | On Road Cost Clearing           |          |    36.70
    1186 | 2-5000 | On Road Cost Clearing           |          |    15.00
    1186 | 2-5000 | On Road Cost Clearing           |          |   420.00
    1186 | 4-1300 | Unit Sales                      |          | 19150.00
    1186 | 5-1100 | Cost of Goods Sold              |  7620.21 |

The Encumbrance is posted separately (in case is needed to be removed/adjusted)

 posting | glcode |              name               |    DR    |    CR    
---------+--------+---------------------------------+----------+----------
    1187 | 1-1200 | Unknown/Unspecified Instrument  |          |  4400.00
    1187 | 1-3100 | GST Input credits Clearing      |   400.00 |         
    1187 | 5-2500 | Other Unit Expenses             |  4000.00 |