Starting with GNUCASH

Buddha Buck blaisepascal at gmail.com
Sun Dec 9 00:48:13 EST 2012


If I understand what is going on in your accounts properly (not
guaranteed), ultimately you want to be dealing with 4 accounts in
GnuCash:

Assets:Checking Account
Assets:Escrow Account
Liability:Mortgage
Expense:Mortgage Interest

The bank does not know about these GnuCash accounts (they are accounts
in your books, not theirs), and likewise GnuCash does not know about
the accounts in the banks books (which would look like Liability:Jeff
VanderDoes Checking Account, Liability:Jeff VanderDoes Escrow Account,
Asset:Jeff VanderDoes Mortgage, Income:Interest from Mortgage Loans).
Obviously, since the first three of your accounts correspond exactly
to the first three accounts in the bank's books, the goal is to make
sure that the flows of money into and out of those accounts are the
same in both sets of books.  Importing and reconciliation are designed
to do that.

>From your perspective, you are making a monthly payment out of your
checking account into your escrow account, your mortgage account, and
the mortgage interest expense.  If I understand your example, you pay
$700/mo, $200 of which goes into escrow, and had a $300 interest
charge in January (rounding for example's sake).  There are several
ways of recording that:

1) As a single, monthly, transaction that is split among accounts.
You would credit Assets:Checking $700, and debit Assets:Escrow $200,
Liability:Mortgage $200, and Expense:Mortgage Interest $300.

This has the advantage that this is how it looks to you: you make one
payment, and the money goes where it needs to.  The disadvantage is
that this may not be the way it looks to the bank (there is evidence
in your statement of this), which can make reconciliation and
importing difficult.

I also haven't used the mortgage scheduler functionality, so I don't
know how hard it is to create a transaction split like this that way.

2) As two monthly transactions: One from your Checking to your Escrow
Account, and a separate one from your Escrow Account to the Mortgage
Payment.  You would have one transaction crediting Assets:Checking
$700 and debiting Assets:Escrow $700, and another (split) transaction
crediting Escrow $500 and debiting Liability:Mortgage $200 and
Expense:Mortgage Interest $300.

This treats your escrow as if you had an "escrow agent" (which you do,
as that's how escrow works), and are giving your agent $700/month to
distribute according to the terms of the escrow agreement.  The escrow
agent then makes a mortgage payment on your behalf out of your escrow
account.

This may be closer to to how your bank is thinking of it.  While you
feel that the $700 payment to your Mortgage Account was coming from
your Checking, the bank may feel it's coming from their Escrow
accounts (which may legitimately comingle various people's monies, as
long as the bank can sort out who gets what), and that's not an
account you are directly affiliated with, so your statement just lists
it as "unknown".  The same goes for the interest charge, which would
go against an unknown internal interest income account at the bank.

3) As three monthly transactions: One from your Checking to your
Escrow Account (as above), one from your Escrow Account to the
Mortgage Account, and a third from your Mortgage Account to your
Mortgage Interest account.  The first transaction would be to credit
Assets:Checking $700 and debit Assets:Escrow $700.  The second
transaction would be to credit Assets:Escrow $500 and debit
Liability:Mortgage $500.  The third transaction would be to credit
Liability:Mortgage $300 and debit Expense:Mortgage Interest $300.

This seems like it might most closely match what your bank is doing.
Your bank lists two transactions on 1/1/2013 on your Mortgage account:
a $700 payment and a $292.91 interest charge.  If this is the case,
then this might be the easiest to import and the easiest to reconcile.

What I'm concerned about is that you say you are making a $700/mo
payment, $200 of which goes into escrow and $500 of which goes to your
mortgage.  Yet your quoted bank statement seems to indicate that $700
went to your mortgage, and no indication of $200 going into escrow.
That doesn't seem to match what you think is happening.

On Sat, Dec 8, 2012 at 10:36 PM, Jeff VanderDoes <vanderdoes at msn.com> wrote:
> Once again thanks all the feedback...
>
> If I understand what's been said (and I've figured out the breakout of
> principle, interest, and escrow)...
>
> When I download from bank
>
> I see a transactions from bank like the following
>
> 1/1/2013 | Mortgage Loan | $700.00 | #00xx Payment. Thank you | ... | New,
> UNBALANCED (nee acct to Transfer $(700.00))!
> 1/1/2013 | Mortgage Loan | $292.91 | Interest Charge; Interest Charge |....
> | New, UNBALANCED (need acct to transfer $292.91)!
>
> Right now I have the above transactions tied to the Mortgage account.
>
> As the transaction come in they are yellow  (which I believe means they
> need to be tied to another corresponding account.
>
> I'm not quite certain the two accounts for the first transaction are
> checking account and mortgage account and second are mortgage and mortgage
> interest?
>
> It seems odd to me that the bank doesn't know what account it came from
> (checking savings etc) and secondly.  since part of the 700 is the interest
> (292.91) and escrow 200.00 (not given in bank transactions)  that I may be
> off.
>
> I think I can understand the mortgage and checking... bit as responded to
> earlier maybe it's best when I get the transaction to split right then into
> the components.  It seems I can't from import transaction screen... maybe
> this is a time I import and then secondarily do an extra transaction to
> split it out into separate components...  what's interesting to me is the
> fact that the bank gives the payment and then increases the loan by the
> interest.
>
> Seems odd to me and I can't seem to get the transactions just right.
>
> Any ideas?
>
> Thanks,
> Jeff
>
>
> On Sat, Dec 8, 2012 at 4:39 AM, jcard21 xxxxxxx
> <jcard21+gnucash at gmail.com>wrote:
>
>> Your bank should have a web site where you can register, log into, and
>> view your account (mortgage) status.
>>
>> With any luck, you should be able to see the breakdown between
>> principle, interest, and any other fees or charges for the current
>> month's payment.
>>
>> OR
>>
>> If this information is not available to you on their web site, call
>> your bank and tell them the information you need every month.
>>
>> Let THEM solve your "lack of complete information" problem.
>>
>> If that fails, you can search google for "amortization schedule"
>> (A.S.), and find a web site that calculates your A.S. the same as your
>> bank to the penny.
>>
>> OR
>>
>> Use a spreadsheet to calculate an A.S. yourself.
>>
>>
>> On Fri, Dec 7, 2012 at 10:34 PM, Jeff VanderDoes <vanderdoes at msn.com>
>> wrote:
>> > Thanks so much for the feedback from all!  Now a follow-up question..
>>  Most
>> > of my entries for mortgage payment come from online transactions from
>> bank.
>> >  Since I don't know the split out between principle interest, and escrow.
>> >  (I can do some homework and figure it out eventually... I can est pretty
>> > close my escrow)  Before I put transaction in in final form (ie figure
>> > interest,  principle, escrow) or is there a way to bring it and later
>> split
>> > it out later?
>> >
>> >
>> > Thanks,
>> > Jeff
>> >
>> >
>> >
>> > On Fri, Dec 7, 2012 at 5:53 AM, Mike or Penny Novack <
>> > stepbystepfarm at mtdata.com> wrote:
>> >
>> >>
>> >>
>> >>> Loans have me a little baffled. Say mortgage has payment and some goes
>> to
>> >>> reduce principal and some goes to escrow for taxes and insurance and
>> >>> interest on loan goes to expense account.  Do I use the accounts and
>> minus
>> >>> from checking and add to escrow. then do another set of transactions
>> minus
>> >>> from escrow and add to interest expense; credit from escrow and debit
>> (I
>> >>> get debit and credit confused) mortgage loan... then when taxes paid
>> >>> credit
>> >>> from escrow and debit home insurance (expense account)?  Do I ever
>> have a
>> >>> transaction to some type of equity account?
>> >>>
>> >>>
>> >>>
>> >> You can do it in separate transactions but since your payment is
>> actually
>> >> a single item from your bank account more normal would be to use a SPLIT
>> >> transaction (a transaction involving more than two accounts). The escrow
>> >> account is an asset belonging to you (your property) except not under
>> your
>> >> control. Just like another bank account (some bank account controlled by
>> >> the institution processing your mortgage). It should be in your books
>> as an
>> >> asset account. Then when you get a statement from the institution
>> >> processing your mortgage that they have used some of these funds (to
>> pay a
>> >> tax bill, to pay an insurance bill, whatever) you enter a transaction to
>> >> reflect that.
>> >>
>> >> So each mortgage payment would be:
>> >> debits:
>> >>    Loan principle
>> >>    Loan Interest
>> >>    Escrow
>> >> credits:
>> >>    Bank account (this would be entered first, then hit SPLIT, adjust the
>> >> other side amount to the first account you want to do and enter that
>> >> account, then proceed with the remaining amount till all allocated)
>> >>
>> >> Michael
>> >>
>> >> PS -- As always I will repeat, gnucash AUTOMATES the bookkeeping,
>> posting*
>> >> from journal to ledger, but that doesn't substitute for knowledge about
>> >> basic bookkeeping. This automation is important/useful since
>> transcription
>> >> errors during hand posting was one of the major sources of errors in the
>> >> old pen and ink on paper days. If the documentation provided with
>> gnucash
>> >> isn't enough for you, get a book on "basic accounting". We can help you
>> >> with "how to do it using gnucash way" but you may still need help with
>> >> "what should I be trying to do".
>> >>
>> >> --
>> >> There is no possibility of social justice on a dead planet except the
>> >> equality of the grave.
>> >>
>> >>
>> >>
>> > _______________________________________________
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>> > gnucash-user at gnucash.org
>> > https://lists.gnucash.org/mailman/listinfo/gnucash-user
>> > -----
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>>
>>
>>
>> --
>> jcard21
>>
>>
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