How to enter an existing loan

[Michael DeBusk]

Joe Hildreth wrote:

> Asset:
>    Purchased Assets

I would use:

Assets
   Current Assets
      An account for each bank deposit account
   Fixed Assets
      Vehicles
         Car 1
         Car 2
      Real Estate
          123 Oak Street

Replace "123 Oak Street" with some identifier for your house, such as
the street address. This will let you add more accounts in case you
inherit or purchase more real estate in the future.

I added the "Current Assets" thing to differentiate your bank accounts,
which don't have a "fixed" value, from fixed assets like your house.

> Liability:
>    Home Mortgage

Consider:

Liabilities
   Current Liabilities
      Credit Card 1
      Credit Card 2
   Long-Term Liabilities
      Mortgage [account number]

> Equity:
>    Home Equity

GnuCash usually handles this with the "Opening Balances" account. What
you'd do is this:

Assets:Fixed Assets:Real Estate:123 Oak Street    500,000.00
Equity:Opening Balances                                      500,000.00

Liabilities:Long-Term Liabilities:Mortgage 12345  350,000.00
Equity:Opening Balances                                      350,000.00

Your Opening Balances account would then have a debit balance of
$150,000.00.

Incidentally, since you're likely using cash-based accounting, the
opening balance of your home asset account is the total of your down
payment plus all paid principal plus all home improvements -- in tax
terms, the house's "basis" -- rather than your house's current appraised
value. There's no value in appreciation until you sell.

> Expense:
>    Interest Paid

How about:

Expenses
   Interest
      Mortgage Interest
      Credit Card Interest
      Car Loan Interest

It might be useful when thinking about your finances to separate your
"good" interest from your "bad" interest.

> When I make a payment the transaction like this:
> 
> Home mortgage = principal payment on loan
> Interest paid = interest payment on loan.

More like this:

Assets:Current Assets:Fred's Bank:Checking                3,500.00
Liabilities:Long-Term Liabilities:Mortgage 12345   500.00
Expenses:Interest:Mortgage Interest              3,000.00

> I am not a finance guy by any stretch of the imagination

Aside from two years of high-school accounting classes a lot of years
ago, nor am I. It's not hard to do once your accounts are set up.

I'm a Senior Security Officer at a hospital in Maryland. What do you do
at Three Rivers Hospital?

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