The person before me who set up a mortgage liability line used it to post the full amount of a monthly mortgage payment for the last two years. It was an automatic withdrawal.
They credited the checking account and debited the liability line, so now it shows we have a liability with a negative balance.
I've set up a new liability line to accurately reflect the balance due on the mortgage going forward.
However, deactivating the previous line does not keep it from appearing on our Balance Sheet. How can we do that?
My accounting background is pretty basic, so advice is much appreciated. I get it that we don't want to actually delete the negative liability line, because it does provide a record of payments that were posted even if they were wrong.
The old liability account is still showing up on the Balance Sheet because it still has a balance. To zero that balance, you will need the account to be active, so you can post a new transactions against it.
If you have the time to invest in it and an amortization schedule, you could adjust that liability balance against the interest expense in each month or year to fix the balance, rather than lump sum forcing the old liability to zero and adding the correct balance into the new liability. That would be entering a transaction that credits the old liability and debits the interest expense. That could be done on a monthly basis or one at the end of each year to record the total expense. That would add that amount back into the liability, bringing it eventually back up to a correct balance.
Otherwise, enter a transaction that credits the liability for the amount of the balance (positive amount, not negative) and offset it against the unrestricted equity/net assets/fund balance account. That will zero that old one. Do the opposite to adjust the correct balance into the new liability.
