I have been using PC for about 3 months. I realize now that I did not set up the mortgage correctly to show principal and interest. Since our fiscal year starts over in July, I think I can easily correct it now.
However, when I print a balance sheet for the year ending June 2005, the balance on our mortgage has not changed from the number I entered when I set up the program in April. When I look at the I&E statement, it shows the payments that we have made. How can I correct the current balance on our mortgage? Also, does anyone know where I need to make a correction to ensure that the future payments are deducted from the balance so the balance sheet will be correct?
Thanks,
Tracey
Mortgage Incorrect on Balance Sheet
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Matt
- Authorized Teaching Consultant
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- Joined: Fri Dec 05, 2003 4:04 pm
- Location: Jacksonville, AL
Tracey,
In order for the mortgage liability to update properly on the balance sheet you need to split the mortgage payment into the principal and interest components when posting the payments. For example, let's say you have a $1,000.00 per month mortgage payment. Let's say the breakdown of that payment is $200.00 principal and $800.00 interest. When posting the payment in PC+ you should make the following entry:
DR Mortgage Liability $200.00
DR Mortgage Interest $800.00
CR Cash (Checking Account) $1,000.00
To correct the current balance on your mortgage, go in and reverse the mortgage payment entries you posted for April, May and June and then reinput them split out like my example above.
Matt
In order for the mortgage liability to update properly on the balance sheet you need to split the mortgage payment into the principal and interest components when posting the payments. For example, let's say you have a $1,000.00 per month mortgage payment. Let's say the breakdown of that payment is $200.00 principal and $800.00 interest. When posting the payment in PC+ you should make the following entry:
DR Mortgage Liability $200.00
DR Mortgage Interest $800.00
CR Cash (Checking Account) $1,000.00
To correct the current balance on your mortgage, go in and reverse the mortgage payment entries you posted for April, May and June and then reinput them split out like my example above.
Matt
I want add a complicating factor: We are budgeting $1000 for the payment. How do we show that? It's not a $1000 expense, The expense is only the $800 interest. I think we can budget a liability too, but will that show on a budget report? It won't show on an Income/Expense report.matt wrote:Tracey,
In order for the mortgage liability to update properly on the balance sheet you need to split the mortgage payment into the principal and interest components when posting the payments. For example, let's say you have a $1,000.00 per month mortgage payment. Let's say the breakdown of that payment is $200.00 principal and $800.00 interest. When posting the payment in PC+ you should make the following entry:
DR Mortgage Liability $200.00
DR Mortgage Interest $800.00
CR Cash (Checking Account) $1,000.00
To correct the current balance on your mortgage, go in and reverse the mortgage payment entries you posted for April, May and June and then reinput them split out like my example above.
Matt
The amounts for the principle and interest chage every payment. That really complicates things. For the budget, all we care about is the $1000.
Ron Zastovnik
Memorial United Methodist, Clovis, CA
Memorial United Methodist, Clovis, CA
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Matt
- Authorized Teaching Consultant
- Posts: 733
- Joined: Fri Dec 05, 2003 4:04 pm
- Location: Jacksonville, AL
This email stream illustrates the problems with doing accounting the theoretically "correct" way vs. doing it in a way that the average non-accountant can understand. In working with several churches on this issue I have found that the vast majority correlate cash inflows with income and cash outflows with expenses. Although this is not correct accounting-wise, this is what is most understandable and makes the most common sense to them.
Accordingly, I find that what most churches want to see is that when a mortgage payment of say $1,000 is made, they want to see this $1,000 show up as an expense on the income statement and want it to correlate to a $1,000 reduction in the checking account balance.
I have figured out a way to accommodate both the requirement to correctly report the mortgage liability on the balance sheet, yet show the full amount of the mortgage payment as an expense on the income and expense statement. Here's how to do this.
Let's assume the mortgage payment is $1,000. The components of the payment are $800 interest and $200 principal. You will need to record two accounting entries to accomodate both requirements. The first entry will be to record the $1,000 mortgage payment. This will normally be done via the Accounts Payable module. When cutting the check post it as follows:
Debit Mortgage Payment (Expense) $1,000
Credit Cash (Checking Account) $1,000
Then, you will need to record a second entry in Fund Accounting to update the mortgage liability account for the principal portion of the payment. Record this entry as follows:
Debit Mortgage Loan (Liability) $200
Credit Unrestricted Net Assets $200
Unrestricted Net Assets will then end up being reduced by a net of $800, which represents the net equity reduction caused by the mortgage interest portion of the payment.
Accordingly, I find that what most churches want to see is that when a mortgage payment of say $1,000 is made, they want to see this $1,000 show up as an expense on the income statement and want it to correlate to a $1,000 reduction in the checking account balance.
I have figured out a way to accommodate both the requirement to correctly report the mortgage liability on the balance sheet, yet show the full amount of the mortgage payment as an expense on the income and expense statement. Here's how to do this.
Let's assume the mortgage payment is $1,000. The components of the payment are $800 interest and $200 principal. You will need to record two accounting entries to accomodate both requirements. The first entry will be to record the $1,000 mortgage payment. This will normally be done via the Accounts Payable module. When cutting the check post it as follows:
Debit Mortgage Payment (Expense) $1,000
Credit Cash (Checking Account) $1,000
Then, you will need to record a second entry in Fund Accounting to update the mortgage liability account for the principal portion of the payment. Record this entry as follows:
Debit Mortgage Loan (Liability) $200
Credit Unrestricted Net Assets $200
Unrestricted Net Assets will then end up being reduced by a net of $800, which represents the net equity reduction caused by the mortgage interest portion of the payment.