purchasing the car is one transaction resulting in having an asset worth 5,000. (It is not an expense, but an investment & shows up on balance sheet not P&L)
having a loan is one transaction resulting in having a liability of 4,000. Loan Balance also shows up on P&L.
when you make a loan payment, you need to show the principle paid to the liability account so the Balance Sheet improves
& the amount of interest paid should be posted as an expense which will show up on the P&L.
At year end you can make a depreciation entry (our accountant gives us a list of adjusting journal entries for depreciation) I'm doubt if India's rules are identical to USA rules. Our depreciation shows in P&L as expense & also in Balance Sheet as a reduction in worth of car.
