I am trying to work out the journal entry I need to complete for mortgage interest.
The company has a business mortgage account that is separate to the normal bank account. Every month Capital payments are paid through the bank account, crediting the mortgage loan account. But every quarter the interest of the loan is posted to the loan account and sits against this account.
Previously we had an interest only arrangement so the interest charged against the loan account then cleared out and was debited against the bank account. So this was treated as a normal cashbook entry CR Bank DR interest.
But now because the interest charge is not being cleared out the loan account, I cannot just do a cashbook entry.
I am at a point where the TB is showing the correct capital left on the loan, and I have been accruing for the interest payments.
What is the journal I need to do so I do not have to keep accruing the interest and it doesn't affect the loan outstanding on the balance sheet?
Right... so what you are saying is that when it was interest only, you were entering a payment from the bank account to the nominal expense account for interest. And now the nature of the repayments have changed - you're actually repaying the mortgage, with interest being charged to that.
Firstly, those payments that are put through the bank account - they aren't crediting the mortgage account, they're debiting it. (Crediting is from the bank's point of view, not yours - though it's pretty much entered the English language as meaning what you've written because most people don't understand these things!)
Normally, for the interest, you would credit the mortgage account, and debit the nominal/expense account for mortgage interest.
The balance on the TB for the mortgage should be whatever the capital is plus any interest that has been added - rather than, as you've said, "the correct capital on the loan". You say you've "accrued" for the interest, so I guess what you've done is literally that; show an amount in accruals that corresponds with the interest that's been applied, with the corresponding debit going to the relevant nominal account for the interest on the P&L.
If that's so, then it sounds to me as though all you need to do is move/journal that interest from accruals (dr) to the loan account (cr).
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Vince M Hudd - Soft Rock Software
(I only came here looking for fellow apiarists...)
