Mortgages

melloby · Post by **melloby** » Fri Jun 03, 2005 9:10 pm

Hi,

I am not sure if PCP+ has amortization capabilities. The chart of accounts normally has mortgages listed in expense and long term liabilities.

My first question is do you list your o/s mortgage loan under expense or long term liabilities?

How do you tackle the mortgage payments, considering that a portion goes to interest and principal? For example a new mortgage for 300k for a building the monthly payment is $1,916.56. However on the first mortgage pmt $1,750.00 goes to interest and $166.56 goes on the principal to reduce the mortgage to $299,833.44.

Any suggestions on posting this transactions since the total $1,916.56 won't be used to reduce the mortgage loan? Do you setup a mortgage interest expense account to reflect the interest portion of your payment and then book principal portion of your payment against the mortgage acocunt setup in long term liability?

Any takers???

melloby

Matt · Post by **Matt** » Sat Jun 04, 2005 10:42 pm

Yes, you should set up a long term liability account for the $300K mortgage and a mortgage interest expense account for the mortgage interest. Then, using your example, when you post the mortgage payment, post it as follows:

DR Mortgage Interest Expense 1750.00
DR Mortgage Liability 166.56
CR Cash 1916.56

Randy B · Post by **Randy B** » Mon Jun 06, 2005 8:12 am

One more thing is when you publish financial statements at year end the amount of principal due in the next year would be classified as a current liability and the amount of principal not owed within the next year would still be a long term liability. This does not change the liability or amount owed only where it is shown on the balance sheet.

melloby · Post by **melloby** » Mon Jun 06, 2005 3:07 pm

Hi Randy B,

Can you give me an example of setting up the balance sheet the way you suggest?

Thx

melloby

Randy B · Post by **Randy B** » Tue Jun 07, 2005 7:28 am

The point I raised is a very technical or nit picking one in accounting. As an example lets say you have $100,000 in a mortgage which is a liability. Lets also say you have an amortization schedule and notice that you are scheduled to pay $1,000 in principal the next twelve months. Accountants and ,I suspect they are the only ones that would care, would show $1,000 as a current liability named current portion of long term debt and $99,000 as long term or non current liability. In the end I think everyone preparing financial statements that are not subject to an audit have to ask what value this information has.