Accounting

[Diane Stephens]

Can someone help me set up a Liability account, we have been using the program for at least four year now but have just recently built on and now we have a Mortgage. In place of a checking account, what do I use to show the loan amount owed, so that I can subtract the payments as they are made. I probably already know this but I am at a total blank right now. I have set up a Liability acct. and a fund balance account. Do I need an asset account to show the loan? If anyone has an account set up where you make a loan payment, would you please share the account numbers and details such as the type.DB or CR, category, etc. that you use to handle this type of account.
Thank you for any help you can provide.
I posted this yesterday, but got a reply that I may need to post in the accounting forum.
Thanks

[bobfree]

Diane,

We have a very similar situation at our church. We built a Family Life Center and financed it through a local bank. We have our accounts setup as follows.
Liability Account in 2600 series setup to identify the loan as a Long Term Liability.
Unrestricted Net Asset Account in 3100 series. Our transactions are setup to increase this account by the amount of principal in each monthly payment. This allows our Net Assets to automatically increase as we reduce the debt.
We have Loan payment Expense Account in the 7500 series with sub accounts for principal and interest. This allows the transactions to identify principal amount to be credited to the Net Asset Account. The transaction also applies the principal to the Liability Account, 2600 series, to automatically track the outstanding amount of debt on monthly basis.
Since we have a line in our budget for the payment of this debt the payment is taken from our main asset account in the 1100 series.
A payment transaction would be setup as follows:
1100 series Asset Account Credit for total payment amount
7500 series Expense Account - Principal Debit for principal amount
7500 series Expense Account - Interest Debit for interest amount
2600 series Long Term Liability Loan Account Debit for principal amount
3100 series Unrestricted Net Assets Account Credit for principal amount

We also have a seperate set of accounts to track restricted donations to go toward payment of the debt. We put these into a seperate savings account and apply to the debt once a reasonable amount has accumulated.

Hope I have kept all this straight and it helps.

Bob Freeman

[Diane Stephens]

Thanks to Bob Freeman for the information on my Accounting Question.