Accounting For Special Finance And BHPH Differences

December 2006, Auto Dealer Today - WebXclusive

by David Keller, CPA, CFE - Also by this author

Special Finance and BHPH vehicle sales should be accounted for very differently on your accounting records and financial statement presentation. By recognizing these differences, you will understand your own business better, react to problems and situations much faster, and also help your banks and other financing sources understand your business. They will not only loan you additional funds as needed, but they’ll also be willing to keep your existing financing in place.

Too many times, I receive phone calls from dealers and/or their banks needing our assistance to not only reconcile the dealer’s accounting records, but to assist them in understanding the financial statement presentation. The two are very different. A dealer can have the most accurate reconciled general ledger accounts, but presenting them to the bank in a very confusing format creates the need for assistance.

Financial Statements. Let’s start with some basics. Financial statements prepared internally by dealerships normally consist of a balance sheet and an income statement. The balance sheet is normally presented with the most current month end balances, but it can also be presented as a comparative with the current month side-by-side with the same period last year. The income statement can be shown with the current month and year-to-date balances, only month-to-date balances or just year-to-date balances. Some software programs can also produce a comparative trend report of the balance sheet and income statement which shows a range of periods, including a number of months in a year, multiple years side-by-side, a range of months with a year-to-date column (income statement only), or the current month and/or year-to-date next to the prior year same month and/or year-to-date balances. Most software programs also permit the printing of any of the available financial statements at any time during the month, not just a month end.

Remember, these interim monthly financial statements are only as good as the accounting that is recorded as of that date. Make sure all activity is recorded daily to receive the most accurate financial picture.

Chart of Accounts. To help you and others understand your accounting, you must start with a solid chart of accounts, which includes accounts for both Special Finance and BHPH transactions. There are many accounts that are specific to each type of vehicle sale and many others that will work for both. There should be some structure to the numbering of your chart of accounts so that when financial statements are printed, accounts appear in the correct order of liquidity on the balance sheet for assets and liabilities and in a sales, cost of sales, gross profit, selling expenses, general and administrative expenses, other income, other deductions, and income taxes for the income statement. You need to allow space in the numbering system to add new accounts as your business requires them.

Balance Sheet. Separate receivable accounts for contracts in transit, vehicle receivables (cash deals and customer down payments), wholesale receivables, installment notes receivable, side notes receivable, accounts receivable, employee receivables, etc. should be established. All of these have different liquidity times based on the nature of your business and what lenders you may deal with.

You may want to track your inventories by the type of projected sale for the vehicle, such as Retail, Special Finance, BHPH and Wholesale, along with cars versus trucks, vans and SUVs. Normally cost ranges can separate these vehicles.

Floor plan and other vehicle type financing liability accounts should normally be separated from regular notes payable, as these are the most current liability from a liquidity standpoint.

Sales. Another important item to consider when reviewing your chart of accounts is to make sure they are properly named for what balance and/or activity is recorded in the account. Setup specific sale, cost of sale and reconditioning accounts for normal retail cash sales, Special Finance, BHPH, consignment and wholesale sales. You can separate them further by adding accounts for cars versus trucks, vans and SUVs.

Cost of Sales and Reconditioning. Remember, to truly track your profitability by sales type, you must also have a corresponding cost of sale account for the original purchase price plus transportation and a reconditioning cost of sales account separated by the sale type. Lumping all of your parts and service costs for reconditioning into one account doesn’t tell you where all of the reconditioning costs really went. As you recondition your vehicles, the costs should be recorded to the stock number of the vehicle in inventory, not to cost of sales or other expense accounts. If you do post reconditioning directly to cost of sales or expense, you should make an entry at month end and also at year end to adjust the inventory balance to include all costs associated with the units still in stock at month or year end. Failure to do so will normally distort your profitability dramatically for the monthly financial statements and also the year end tax return.

Finance, Insurance and Other Income. Separate accounts for the income derived from the various back end income items, along with separate chargeback and adjustment accounts, should be setup. This will enable you to track your gross income but also the things that take it away from you.

BHPH Income and Related Expenses. Accounts specific to BHPH collections should be separated on your dealership (if you don’t have a related finance company) in the other income and deduction section of the financial statement. This will be helpful to separate from the normal sales and cost of sales area of the income statement to differentiate this type of net income from operations from the sales operations of your business.

Departmentalization. Most dealerships should review whether they need various departments and the related expense accounts established to more easily separate the different businesses you are in for your banks and also yourself to arrive at breakeven points of profitability.

Helpful Hint: To have the number of vehicles sold appear on your income statement for historical reference for the different sales categories, setup a general ledger account in either the sales area (after each specific general ledger sales account it applies to) or as the last accounts in your general ledger listing. Set up one additional account immediately after all the sales accounts or at the end of the last unit count account to act as the total of all the units and also to balance your journal entry.

Each month end, or with each vehicle sale recorded, post additional line items in accounting that credit the individual unit accounts and debit the total unit account (the last one you set up). At the end of the month when you print your income statement, you will see the balances in the sales accounts and also the number of sold units from that month. The unit counts will also accumulate normally to give you the counts for year-to-date sales. If you can’t go back and record this activity for each month due to software restrictions, you can make a year-to-date entry to record the year-to-date activity through the prior month. Then record the current month sales unit counts at the end of the current month.

Note: If anyone would like to receive a sample chart of accounts for dealership and a related finance company, including most departments you will need and allowing for future growth, please call or e-mail me, and I will forward it to you. It will also work for multiple locations with multiple departments, based on how you want to track each one.
Vol 3, Issue 10


  1. 1. Nikki [ December 12, 2013 @ 08:34AM ]

    I would like a sample chart of accounts, please.

  2. 2. Roberto gonzalez [ January 06, 2014 @ 08:59PM ]

    I would like a sample chart of accounts, please
    I own a bhph and i been using the cash method, and after read your artcle i found that i am doing wrong i need to change my accounting method, the only question is you enter all the sales on the schedule C and you has to make a credit memo for the money that you are not collecting.

  3. 3. Angela Rose [ June 13, 2014 @ 04:52PM ]

    I would like a sample chart of accounts, please. I just recently starting doing the books for BHPH. Looking for resources/books.

  4. 4. Andrew Suski [ January 08, 2015 @ 05:10AM ]

    I would like a sample chart please.

  5. 5. David C Laudeman [ January 22, 2015 @ 08:00AM ]

    I would like a sample chart of accounts. I am now doing the accounting for a BHPH dealership and Related Finance Company.

    Thank you.

  6. 6. Donna Dalton [ February 14, 2015 @ 11:20AM ]

    I would like a sample chart of accounts for a BHPH dealership and related Finance Company

  7. 7. Fahad Hussain [ June 11, 2015 @ 06:10AM ]

    I would like a sample chart please.

  8. 8. Carol [ July 24, 2015 @ 04:46PM ]

    Yes, please send me your sample chart of accounts.

  9. 9. Charlotte [ August 25, 2015 @ 11:05AM ]

    I would like a copy of your chart of accounts for Buy Here Pay Here and a related finance company.

  10. 10. sondra lunsford [ October 30, 2015 @ 08:56AM ]

    please forward me a copy of your chart of accounts.
    Thank you

  11. 11. Matt [ November 18, 2015 @ 08:44PM ]

    I would really appreciate a COA. I am interviewing for a Controller position with a BHPH motorcycle dealership Friday morning and am doing a great deal of studying on the concept. I have limited experience with BHPH and would like to be familiar with things as I approach the interview. Thank you.

  12. 12. Emad hafiz [ May 17, 2016 @ 06:02AM ]

    I would please love a copy of your charts of accounts for buy here pay here and the related finance company. Thank you so much for your time.

  13. 13. Angelica [ May 21, 2016 @ 09:53AM ]

    can you forward me a copy of your chart of accounts, thank you.

  14. 14. Carme [ July 20, 2016 @ 11:31AM ]

    I would appreciate a copy. Thank you

  15. 15. Jenny [ October 31, 2016 @ 01:16PM ]

    I would appreciate a copy of your chart of accounts. Thanks!

  16. 16. Rebecca [ November 08, 2016 @ 11:08AM ]

    We would like a sample chart of accounts. Also, what accounting software would you recommend (we are a very small dealership)

  17. 17. Scott Cooper [ February 06, 2017 @ 11:22AM ]

    I would like a list of your BHPH chart of Accounts. We do about 25 cars a monh of which 30% are BHPH

  18. 18. Letitia Pines [ February 28, 2017 @ 04:03AM ]

    I would appreciate a copy of the chart of accounts. Thank you

  19. 19. Tarsha Jackson [ March 14, 2017 @ 05:53AM ]

    Chart of account for used car dealership

  20. 20. Tarsha Jackson [ March 14, 2017 @ 05:54AM ]

    I need charts of account for used car dealership. How you track ur sold vehicle

  21. 21. Alicia [ March 26, 2017 @ 05:48PM ]


    Nice article. Can you please send us a copy of the chart of accounts.

    How do we do the journal entry for inventory ie once a car is sold, how do we take it out of the inventory?

  22. 22. Alicia [ March 26, 2017 @ 05:48PM ]


    Nice article. Can you please send us a copy of the chart of accounts.

    How do we do the journal entry for inventory ie once a car is sold, how do we take it out of the inventory?

  23. 23. Rita [ April 23, 2017 @ 08:20AM ]

    I would like a sample chart of accounts and would like to know what accounting software would you recommend for a small dealership. Thank you.

  24. 24. Kathy Tashner [ May 17, 2017 @ 08:43AM ]

    Thank you for answering my question on the first search! Please send sample chart of accounts for bhph.

  25. 25. Bruce [ August 09, 2017 @ 09:05AM ]

    Please send sample chart of accounts for bhph.

  26. 26. Caroline [ August 21, 2017 @ 05:55PM ]

    Thank you, I would like to receive your CoA sample ....thank you again,

  27. 27. ROBERT JACKSON [ January 04, 2018 @ 05:41PM ]

    I would like a sample chart of accounts for bhph

  28. 28. Angela Shuford [ January 07, 2018 @ 12:21PM ]

    I would like to have a sample chart of accounts and financial statements please. Thanks!

  29. 29. Sam [ January 30, 2018 @ 02:18PM ]

    I would like a sample chart of accounts for bhph.
    Also if you have a bhph investment company would the interest that you received on those notes be ordinary? or be considered as interest income ex. bank interest.

  30. 30. Tish Pines [ February 07, 2018 @ 05:05AM ]

    I would like a sample chart of accounts for BHPH.

  31. 31. Jjw [ March 02, 2018 @ 05:57PM ]

    Please send me sample chart of accounts

  32. 32. NANCY A STADNICKI [ March 06, 2018 @ 12:07PM ]

    Please send me a copy of your chart of accounts for BHPH. Thank you so much

  33. 33. Jack Williams [ March 22, 2018 @ 11:09PM ]

    Please send me a copy of your chart of accounts for BHPH. Thanks!

  34. 34. Travis Griffis [ April 06, 2018 @ 09:25PM ]

    I would like a sample of the chart accounts for each please. Thanks

  35. 35. Colleen Wright [ April 16, 2018 @ 04:20AM ]

    I would also like a copy of the chart of accounts for a bhph. Please and thank you

  36. 36. GEORGE MORALES [ June 06, 2018 @ 07:04PM ]

    I have a used car lot and I need to do 2016 and 2017 balance sheets but I never done it before I need help

  37. 37. [ July 03, 2018 @ 02:27AM ]

    i would like a copy of the chart of the account

  38. 38. [ July 03, 2018 @ 02:27AM ]

    i would like a copy of the chart of the account


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