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.