To manage a car rental accounting is essential to optimize, enhance and make your business profitable. How can you do it?
A rental agency or a fleet manager must put in place specific accounting processes to adapt to the needs of its rental activity. The accounting activity of a car rental is indeed extremely important for a company to grow in this sector. We therefore provide you with the main advice and rules to follow in order to properly manage the accounting activity of a car rental business.
How do you manage the accounting activity of a car rental business?
The accounting activity of a car rental is divided into several accounting transactions. First, record the rentals and fees paid. In the case of an operating lease, i.e., without an option to purchase, debit the “equipment lease” account (Chart of Accounts account 6135) to credit the “supplier” account (account 401).
To account for a car lease with a finance lease, the source of the account differs. It is then necessary to account for the lease by debiting the “equipment leasing” account (account 6122) to credit the “supplier” account (account 401). It is also advisable to provide your leasing customers with precise information regarding the commitments made (fees paid, due dates, residual value, etc.).
Other specific transactions are necessary to account for a car rental. For example, in order to record fuel expenses, the “non-storable supplies” account (account 60611) must be debited. Maintenance and repair expenses are charged to the “Maintenance and repair of movable property” account (account 6155). Lump-sum and mileage allowances and parking and toll charges are debited to the “travel and transportation” account (account 6251). Insurance receipts should be debited to the “insurance premiums” account (account 616) and the majority of fines and tickets should be debited to the “penalties, tax and penal fines” account (account 6712).
Finally, when the final payment has been accounted for, debit the “supplier” account (account 401) to credit the “bank” account (account 512). These are the basics of car rental accounting.
How to account for exercising a car purchase option?
When the customer wishes to exercise the purchase option of the car rental contract, how do you account for a customer exercising the purchasing option? Once this option is exercised, the user becomes the owner of the car for a value contractually fixed beforehand. This is called the residual value.
The accounting of a car acquisition is then very simple. Debit the account “transport equipment” (account 2182) to credit the account “fixed asset suppliers” (account 404). As soon as the invoice has been paid, debit the “suppliers” account (account 404) and credit the “bank” account (account 512).
Finally, the owner company must finally estimate the actual useful life of the asset in order to proceed with the depreciation of the car. To this end, debit the “depreciation and amortization expense and provision for property, plant, and equipment” account (Account 68112) to credit the “depreciation of transportation equipment” account (Account 28182). These accounting transactions are essential to manage car rental accounting properly.
What are the rules to be respected in the accounting management of a car rental?
Several legislative and administrative rules and criteria must be respected in the to manage the accounting activity of a car rental. Firstly, it is recommended to know the fiscal limits of the deduction of car rentals. Indeed, the tax authorities impose in certain cases a deduction of specific car expenses in the accounting of a car rental (reintegration of excess rentals). However, companies whose cars are necessary for their activity are exempt from this requirement and the cars must be leased or rented for more than three months (or less if the contract is renewable). Find out more about your eligibility.
The lessor must also calculate the reinstatement of car rentals or royalties to the business owner. This reinstatement of car rentals corresponds to the depreciation practiced by the lessor on the excess fraction of the car’s purchase price plus the corresponding VAT. The excess rentals subject to reintegration must be mentioned. These are the main constraints to be respected and known in order to account for a car rental efficiently.
How to optimize the accounting management of a car rental?
There is a key tip to help you optimize the accounting management of a car rental. Indeed, the main advice that any good car rental and fleet manager will recommend is the use of a car rental accounting software. The implementation of this type of management tool in your company’s computer system will greatly help you to simplify, automate and optimize the accounting practices of a car lease. Fortunately, there is a complete tool that accompanies more than 5,000 car rentals, the myrentcar car rental solution.
Why use a car rental accounting management software?
The myrentcar web solution is the reference as a car rental accounting management software. Indeed, myrentcar allows you to centralize and synchronize all the information of your rental activity to optimize it and make significant time and efficiency gains. The car rental accounting software myrentcar is a cloud-based solution accessible on computer, tablet and smartphone that manages all rental cycles of all types of cars (passenger car, utility vehicle, SUV, sedan, motorcycle, scooter, truck, bicycle, scooter, boat, …) in short, medium or long term. Thanks to the myrentcar car rental software, it has never been easier to create reservations via an intuitive schedule and to edit the corresponding quotes, contracts and invoices. The solution is also compatible with the rentpad car inventory application.
Developed by hitechsoftware, the myrentcar car rental accounting solution integrates complete management of car accounting in compliance with the standards and laws in force thanks to constant updates. The myrentcar ERP also ensures full accounting export, the accounting being interfaceable and compatible with numerous car rental accounting software, software packages and applications. Would you also like to facilitate car rental accounting in order to enhance, optimize and make your rental agency more profitable? Get more information and a demonstration of the myrentcar car rental accounting management software here.