[GNC] how-to track refinancing and other cost related to it.

[David Cousens]

Kalpesh

When you take a loan out against an asset as collateral, unless you default on
the loan you still have the asset in your control so the asset account is not
affected by taking out a loan against it.  You depreciate it as you would even
if it isn't collateral for the loan and the depreciation is an expense. You may
be obligated to keep the asset for the period of the loan however unless you
renegotiate with the bank to use other assets as collateral.

The only account you need to create are the usual accounts for managing a loan
as a liability.

When you refinance any fees/costs associated with completing the previous loan
and starting the new loan are going to be expenses. The first loan will be
closed by the amount of the closing payment to it.  Basically it should look
like

Asset: Bank           Dr Loan principal
Liability:New Loan    Cr Loan principal

Asset Bank            Cr loan fees
Expenses:Loan Fees    Dr Loan Fees

Asset Bank            Cr amount to finalize previous loan
Liability:Old loan    Dr amount to finalize previous loan
 
and any new asset purchases would be processed as a credit to the bank account
and a debit to a new asset account. The last one would be repeated for any other
loans you were finaizing from the new loan with the corresponding amount to
close each loan as the amounts of the Dr and Cr. 

You could do the above set of transactions as a multiplit stransaction or a
series of simple 2 split transactions using a tag to identify that they all
belong to the same refinance operation.

Same approach with the second refinancing.

David Cousens


On Sat, 2023-01-28 at 10:19 -0500, Kalpesh Patel wrote:
> Need some thoughts here as to how-to setup my accounts. Disclaimer: this may
> somewhat dwell into accounting side as well but given the wide breadth of
> the user community wanted to hear all different ways to do setup GNC to
> track everything down to last cent if possible. 
> 
>  
> 
> Situation is as follows:
> 
>  
> 
> -          An asset was purchased with cash
> 
> -          Took a loan out against it a year later 
> 
> -          The loan was refinanced 8 years later which paid off two other
> assets in the process in addition to previous loan
> 
> -          The loan was refinance again one year later which paid off
> previous loan plus it helped finance another asset
> 
>  
> 
> How should accounts be set up in GNC if someone wants to track the cost of
> financing plus the appreciation/depreciation that may be taking place along
> the way.
> 
>  
> 
>  
> 
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