[GNC] Track income and expense report for rental property
Michael or Penny Novack
stepbystepfarm at comcast.net
Fri Jul 8 11:51:04 EDT 2022
On 7/8/2022 11:20 AM, Peter Wu wrote:
> Hi there,
> See attached bar chart. Blue means income, red - expense, and green is net profit.
>
> This is inaccurate because the red expense does not include mortgage payment.
>
> Question: how can I include mortgage payment in my monthly income/expense chart?
>
Misunderstanding?
When we use the word "expense" in budgeting that means an outlay. But in
accounting, an outlay is not necessarily an expense or not necessarily
entirely an expense.
Take that mortgage payment. That would (or should) be a SPLIT
transaction. Part of that payment is for "mortgage interest" (THAT part
would be a debit to an account of type expense). Part of that payment
would be going into an escrow account used to pay tax bills, insurance
bills, etc. (THAT part would/should be a debit to an account of type
asset; it's yours still until payments made from that for those bills as
they come due). And part would paying off a portion of the loan and so
would be a debit to the account of that liability.
The only portion of that mortgage payment that is immediately an expense
was the interest. The RE tax bills and insurance premiums will become
expenses when the escrow holder pays them form your escrow account. And
the portion that is reducing the mortgage principle is never an expense.
This difference is why you might need to run a "cash flow" report <<
that's more like "expenses" as you are thinking of them >>
Michael D Novack
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