Expense account for mortgage principal

[Neil Williams]

On Saturday 26 March 2005 12:11 am, Jim wrote:
> Interest     Expenses:Interest Mortgage     25.00
> Tax          Expenses:Taxes:City Property   25.00
> Principal    Liabilities:Loan Mortgage Loan 50.00
> Payment      Assets:Bank Account                  100.00
>
> This seemed to work fine until I ran an income/expense report.

It sounds like you are trying to deal with a liability as if it was an 
expense. There was a similar discussion on this list about local taxes, in 
reverse.

My example is that if there is a debt that must be paid from your estate upon 
death, it is a liability. If payments cease upon death, it's an expense. It's 
a little simplistic but it does help to show the difference.

Your estate remains liable for a debt after death, your expenses stop.

> The 
> problem I'm seeing is that the Principal doesn't show up as an expense.

Because it isn't an expense. It's a payment off a balance - a liability.

> I'd like to use this report as an indication as to what my cashflow
> 'really' is.

If it's a variable rate mortgage, there is no way of knowing. The rate is 
going to change again before it's paid off. Any indication would be a guess 
and it won't come out that different to the original plan, i.e. somewhere 
around 25yrs in full term. I guess you knew that.

> That is, I'd like to see how much I'm really coming out 
> ahead (or behind) every month.

That's your Equity.

> I'm thinking that the solution is to 
> create another Expense Account for principal Payments.

?? That's just ignoring the reality that this is a liability, not an expense.

> 1. Is this acceptable accounting?

Not to me.

> 2. If so, How/Where should I place the other entry to balance the
> principal payment?

It is balanced, it's balanced with the liability.


-- 

Neil Williams
=============
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