Accounting - Setting Up Mortgage

[Becky Davis]

We are in the process of obtaining a mortgage and are scheduled to close on December 15. We had to put down $25,000 earnest money. The money is in the building fund, and it was set up as a restricted account. Now I need to get the $25,000 out of there and charge it off. First, I can't figure out how to make the entry. I know I need to release the money from Building Fund using the release account. And then I need to credit checking and then what? Debit Mortgage account? Or should this wait and be done at the closing when I have all of the data?

Also when setting up the mortgage account, I assume I debit building asset account, and credit mortgage liability?

Since we will be using the building account monies for the down payment, is there a way to change this from a restricted account to a temporily restricted account?

Help!

[Matt]

You will want to record an entry now for the $25,000.00, since this money has already been paid out. The entry should be as follows:

Debit Fixed Assets - Building
Credit Checking Account

Yes, when you set up the Mortgage liability account, debit the Fixed Assets - Building account and credit the mortgage liability account.

After the close is complete and you have recorded the postings the Fixed Assets - Building account value should be the same as the price you paid for the building. Closing costs should be either expensed or set up in a escrow account.

Not sure what you mean with your last question. Please be more specific. If you can provide account numbers that would be helpful.

[Becky Davis]

What I mean by using the building fund monies to pay the mortgage was, that we will be using money that comes in to our Building Fund, to offset the expenses of the mortgage payments. When our accounts were set up the building fund income acct was set as a restricted account.

Now, I need to somehow show the monies that are still coming into the building fund, yet be able to track the remaining balance (income - money used towards mortgage payment each month). I have the same problem with the $25,000 earnest money - Pastor wants me to pull that money out of the building fund, yet he still wants it to reflect that it was income and not reduce the income account so that it appears we never received that amount of money. I think this is probably where the release accounts come in, but quite honestly, I'm not sure how to use them.

For instance - let's say there is $100,000 in Income Building fund (restricted account). I want to pay the $25,000 earnest money, which we discussed above. But I also need to somehow show that this money reduced what is available in the building fund account. How do I do that?

[Matt]

Becky,

I need to see the trial balance for your building fund and have you tell me specifically which accounts hold the balances you describe to answer your questions. Please run the trial balance report for the building fund (make sure the "include zero balance accounts" box is checked), save it as a PDF file, and then email it to me at huntersaccounting@msn.com.

Thanks,

Matt