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Mortgages Accounting on Principal and Interest

mortgage as a lender

Q: Hi Gita! What is the best way to account for a loan with both principal and interest payments? We collect rent, but need to pay off a mortgage. Should I have separate expense accounts for both principal and interest?

Answer: I always recommend tracking details on each payment for principal, interest and escrow. Principal will be a Liability account, Escrow woud be an Other Current Asset and Interest should be a Expenses. Yes, that is the only way you will be able to know your expenses and what you owe on each property.

 

Gita Faust

About the Author

Gita Faust has over 30 years of accounting experience in the real estate and property management industry, Gita Faust is more than just a real estate investor; she is also popular for her work as an accountant, consultant, mentor, speaker, QuickBooks Top ProAdvisor, QuickBooks Solution Provider, member of Intuit’s Trainer/Writer Network, and, of course, author. Gita is well-known for her exemplary leadership and advisory skills. In fact, she even helped pioneer the adaptation of QuickBooks to suit the needs of professionals in real estate and property management. To share her knowledge she has written a series of courses titled Simplified Accounting Solution, which provides step-by-step guidance for those working with QuickBooks.

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