Liability Accounts

Riverside-MB-Church · Post by **Riverside-MB-Church** » Mon Jan 31, 2005 7:43 pm

Church will be adding a Liability in Feb or Mar of 2005. I have information regarding the total debt and the monthly payments. I am attempting to set up liability account. Should I enter the Beginning Balance as a debit and credit the Fund Balance? When the monthly payment come due, they will automataically be deducted from checking account. How do I post this transaction?

Randy B · Post by **Randy B** » Tue Feb 01, 2005 7:49 am

If you are buying an asset, debit the asset for the purchase price and credit the liability for the amount borrowed and credit cash if you paid any. Debits always equal credits. Liabilities have a credit balance and are reduced with debits. When the payment is due, you will debit the liability for principal reduction, debit interest expense and then credit cash.