How to track mortgage (liability) payments as part of expense reports

womble wandering.womble at
Mon May 15 19:39:46 EDT 2006

Hi there-

First, my thanks for all those involved with making this software.  It 
'just works', the importers (qif/ofx) are very good (considering what 
they have to deal with as input), and it's straight forward to understand.

However, there's one thing I'm having difficulty with: how to handle 
mortgage payments, so that they show up as part of expense reports, 
which I'm using to figure out where our money is disappearing to :)

(My apologies if this has been covered before- I've looked at the 
manual, and used Google, but so far I've not found anything helpful- I 
may just be using the wrong terms though; I'm not an accountant!)

This is what I've done:

Created a liability account for the mortgage.
Entered an initial transaction (from Equity:Opening Balances) for the 
mortgage total.
Entered an 'adjustment' transaction to make the current mortgage balance 
match the official bank statement from the beginning of the period from 
which I've started entering/importing data (Feb this year).

I'm not really interested in tracking the above two transactions; 
they're just informational to me.

Our mortgage is paid for by an automatic payment at the bank.  This 
payment covers principle reduction, interest, and local taxes.  As it's 
an automatic payment at the bank, I haven't used GnuCash's scheduled 
transaction feature.  All payments will appear when I import the next 
OFX export from the bank.

So when I import the OFX file, I assign (deposit) the automatic 
withdrawals for the mortgage from our normal bank account (in)to the 
Liabilities:Mortgage account in Gnucash.

I then manually create transactions in the Liabilities:Mortgage account 
in GnuCash which deduct interest and tax payments to the appropriate 
expense accounts- Mortgage Interest, and local taxes (both expense 

(I realize that these second level manual transactions are redundant, 
that I could create a split for the imported payment transactions.  But 
I personally just find this easier to read as a summary for the main and 
mortgage accounts- it effectively groups things in a way that makes 
sense to (if not to anyone else.))

Now when I do an expense report, everything looks good- I can see how 
much we're spending on groceries, utilities, interest, etc- but NOT the 
payments for mortgage principle.

I could instead assign the automatic bank withdrawals to an expense 
account (so they show up on the budget report) but then the liability 
total won't be reduced- the expense reports will show what I want, but 
the net worth reports won't.  If I then set up transactions from the 
expense account to the liability account, I'll end up back at the 
beginning- liability is reduced, but this expense account will have a 
zero balance.

Effectively, in this one case, I effectively want to 'double count' 
these principle payments- but I realize this isn't particularly good 
double-ledger book keeping. 

So far the only way around this that I can see is to create a new equity 
account like 'opening balances', called something like  'mortgage 
fiddle', and create manual transactions mirroring the actual principle 
reduction, with the destination being the liability account.

Is there a better way to do this- so that you can both track liability 
(loan) repayments as an expense and also have them reduce the loan 
principal?  i.e. have both expense and asset reports being correct?

Thanks in advance for any suggestions-


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