Setting Up Loan to an Individual

[Pastor K]

We have loaned money to an individual as a mortgage. How should we set this up in PC?

The money came from an investment account. The payments will be made to the general bank account, and then sent to the investment account.

[JohnDMeyers]

I guess you will want to show the property as an asset of the church until it is paid off.

To transfer the money from the investment account to checking (assuming they are both in the same fund):
DB checking
CR investment

To pay out the mortgage:
DB newly acquired property asset
CR checking

To receive payments (I am assuming no interest):
DB checking
CR newly acquired property asset

To write a check back to the investment account (assuming same fund as checking)
DB investment account
CR checking

Let me know if my assumptions were incorrect.

[Pastor K]

This is helpful, but I think it is a little more involved.

The investment account is in a seperate fund. There was a check written directly from the investment to the closing agency. We have not entered that transaction yet - wanting to put it to the right place. There was an overage that was given back to the church, and deposited into checking. It has been put into a transfer funds line at this point. There is interest on the loan.

Is it possible to set up the payments through receivables? Because it is a mortgage there needs to be a statement for taxes of the interest paid.

I understand setting up the asset for the loan. What would the transaction look like that would take interest and principle to the investment account? Is it possible to set up the loan asset in a seperate fund that uses the checking account? I think it would be best to keep this from the 01 general fund - too confusing for people, as it would be income that is not contributions.

[JohnDMeyers]

This would be a good use of the Accounts Receivable module. Just realize there is no mechanism to connect the Contribution Module to the Accounts Receivable module, so the checks received shouldn't be processed with the regular church offerings. They should be deposited separately and recorded in Accounts Receivable.

I will use Fund 03 as the investment fund account in this example.

The checking account will have the same major account number 1110 if you are using the same physical bank account.

When money is received, it can be deposited directly in Fund 03-1110-000. The CR account can be the newly acquired asset account (03-1615-000, for example).

Be careful of this: In Accounts Receivable, the default checking accounting account is the system-wide default, which is usually 01-1110-000, so it will have to be changed each time. (see Preferences, Accounting Setup, GENERAL tab)


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1) The money received in Accounts Receivable payments:
DB 03-1110-000 checking
CR 03-1615-000 new asset (this balance will decrease to zero as asset is paid off)

2) The check written to the investment account:
DB 03-investment fund
CR 03-1110-000 checking

Note:
You may combine these two steps if the money goes directly into the investment account without touching your general checking account:
Combining 1) and 2)
DB 03-invesment account
CR 03-1615-000

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Finally, to make the entry for the check written from the investment to the closing agency:
CR 03-investment fund
DB 03-1615-000 new asset

The overage (deposit) will be this:
DB 03-investment fund
CR 03-1615-000