Shared asset with brother, mortgage involved, not mine, how to account for that?
Daniel Farfán Muñoz
dfarfanmunoz at gmail.com
Fri Oct 3 15:47:45 EDT 2014
The agreement is: each of us owns 50% of the office value.
So, should I separate the office accounting to another gnucash file?
Then, how do I account in my personal finance file how much I own of the
office at a certain time? I own the 5% plus 50% of the paid mortgage.
Thanks!
2014-10-03 14:45 GMT-03:00 Buddha Buck <blaisepascal at gmail.com>:
> This is why I suggested talking to an accountant in his jurisdiction,
> because how he described his situation doesn't match how I assume it would
> work (knowing what I, as an inquisitive non-accountant, know about how
> things work where I am), or what you (Aaron) are describing.
>
> Here's how I'd answer his questions:
>
> How much of the office does Daniel own? 5%, or 50%, depending on the
> nature of his agreement with his brother, the agreement I know none of the
> details of.
> How much of the office does his brother own? 50%, or 95%, depending on the
> nature of his agreement.
> How much of the office does his bank own? None, unless Daniel and his
> brother default on the loan.
>
> How would this be accounted for? Depends a lot on the details.
>
> 1) One method would be to completely separate the joint business from your
> personal finances, and keep a set of books just for that venture. You can
> transfer pertinent summary data over when you need to.
>
> Have this set of relevant accounts:
>
> Asset:Bank Account
> Asset:Office Property
> Expense:Mortgage Interest
> Income:Rental
> Liability:Mortgage
> Equity:Daniel
> Equity:Brother
>
> Let's say the property sold for $100,000 with a $90,000 mortgage at 6% for
> 15 years, and $5,000 from each of you. Then the monthly mortgage amount is
> $843.86. Let's say you rent it out for $1000/month.
>
> So to start the process, you would enter the following transaction:
>
> 2015-01-01 Buy the property
> Debit Asset:Office Property $100,000
> Credit Liability:Mortgage $90,000
> Credit Equity:Daniel $5,000
> Credit Equity:Brother $5,000
>
> That says that the two of you own the $100,000 office, but collectively
> owe the bank $90,000, with $5000 each remaining.
>
> For the rent, you'd enter
>
> 2015-01-01 January office rent
> Debit Asset:Bank Account $1000
> Credit Income:Rental $1000
>
> For the mortgage payments, you'd enter
>
> 2015-02-01 Mortgage Payment
> Debit Expense:Mortgage Interest $500
> Debit Liability:Mortgage $343.86
> Credit Asset:Bank Account $843.86
>
> After a year, you'd have an income statement that looked like
>
> Income Statement for 2014-01-01 to 2014-12-31
> Income:Rental $12,000
> Total Income: $12,000
>
> Expense:Mortgage Interest: $5884.61
> Total Expense: $5884.61
> Retained Earning: $6115.39
>
> and a balance sheet that looked like
>
> Balances as of 2015-12-31
> Asset:Bank Account: $1873.72
> Asset:Office Property: $100,000
> Total Assets: $101873.72
>
> Liability:Mortgage : $95,758.33
> Total Liabilities: $95,758.33
>
> Retained Earnings: $6115.39
> Equity:Daniel: $5000
> Equity:Brother: $5000
> Total Equity: $16115.39
> Total Liabilities and Equity: $101873.72
>
> But really, only someone familiar with your situation, and the local
> accounting practices and laws surrounding it, can give you the correct
> answer of how you should do it.
>
>
> On Fri, Oct 3, 2014 at 9:51 AM, Aaron Laws <dartme18 at gmail.com> wrote:
>
>> (Not an accountant)
>>
>> I hate to speak out before a more experienced hand, but then again, I
>> certainly won't speak *after* another! Perhaps I can stumble forward to
>> provide a starting place for one of the greater.
>>
>> When rent comes in, if the rent cheque is written to your brother, then he
>> writes you a cheque:
>>
>> assets:chequing R/2
>> revenue:rent R/2
>>
>> Where R is the full rent amount. When the mortgage payment is due,
>> assuming
>> you both write a cheque to the mortgage holder:
>>
>> assets:myoffice (P/2-I/2)+E
>> expense:interest I/2
>> assets:chequing P/2+E
>>
>> Where P is the full mortgage payment, I is the interest acrued, and E is
>> any extra payment you make. When work is done or bills come in for the
>> building:
>>
>> expense:repairs B/2
>> assets:chequing B/2
>>
>> Where B is the amount of the bill. Does that make sense? With this
>> scheme,
>> the timing of rent payments and mortgage payments is disconnected: you can
>> pay mortgage quarterly and earn rent weekly, for instance. I'm assuming
>> you
>> split the rent income and mortgage payment down the middle. I'm also
>> assuming that your brother would be okay with you paying extra and owning
>> more of the building with extra payments!
>>
>>
>>
>>
>>
>>
>> In Christ,
>> Aaron Laws
>>
>> On Fri, Oct 3, 2014 at 9:38 AM, Daniel Farfán Muñoz <
>> dfarfanmunoz at gmail.com>
>> wrote:
>>
>> > Thanks. We are doing business as ourselves, no company involved.
>> >
>> >
>> > 2014-10-03 10:34 GMT-03:00 Aaron Laws <dartme18 at gmail.com>:
>> >
>> >> (Not an accountant.)
>> >>
>> >> Is there a business or company involved, or are you two doing business
>> as
>> >> yourselves?
>> >>
>> >>
>> >> In Christ,
>> >> Aaron Laws
>> >>
>> >> On Fri, Oct 3, 2014 at 6:24 AM, Daniel Farfán Muñoz <
>> >> dfarfanmunoz at gmail.com> wrote:
>> >>
>> >>> Hi everyone, I hope someone can help me with this:
>> >>>
>> >>> My brother and I bought an office together. I did a downpayment of 5%
>> of
>> >>> the value of the office. My brother paid the other 5%. He got a
>> mortgage
>> >>> of
>> >>> 90%. We rent the office to someone else, I receive the monthly rent,
>> and
>> >>> then I transfer the money (minus some operational charges) to his
>> account
>> >>> so he can pay the mortgage.
>> >>>
>> >>> So, I own the 5% of the value of the office, plus some money I earn
>> from
>> >>> the rent. But how do I account for that in gnucash? How do I know how
>> >>> much
>> >>> of the office I own? Or how much I'm earning by renting it?
>> >>>
>> >>> Thanks in advance.
>> >>> _______________________________________________
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>> >>
>> >
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