Double entry confusion

[Rich23]

Hi all

My business mortgage:

My loan account has loan, loan fee, capital payments, interest payments.

The double entry for the loan, capital and interest goes in my cheque account ( for shop purchase and payments out of the bank respectively)but I need to move the capital payments to drawings too so three entries. I am missing a double entry here.

Similarly with the interest payments the third account is finance interest but no fourth.

Finally the loan fee which doesnt appear anywhere else has no double entry. It didnt go to my bank account as its being paid via the capital and interest payments.

Can anyone tell me the right accounts to put these entries through as my P&L is fine but my balance sheet is wrong.

Thanks for any help.

Cheers

Rich

 

[dcaccounting]

I have no idea what you just said :lol:

Can you try and rephrase the question and maybe give us an example of your current double entry?

Regards

Dean

 

[Rich23]

Hi Dean

Bank Account Paid in mortgage total (A) from Loan AC
Paid Out mortgage total (A) to Seller
Paid out mortgage interest & capital monthly payments(B&C) to loan AC

Loan AC Paid Out mortgage total (A)
Paid out loan fee (E)
Paid in capital and interest payments (C&B)

Drawings capital payments (C)
Interest AC interest payments (B)
Asset Premises gained from mortgage payment (A)

You wil see that payments B&C have 3 entries not 4 and entry E has only 1 entry. I belive entry A the mortgage total loan is incorrectly ascribed too.

Thanks Dean for any help you can give.

Rich

 

[Joyous]

Hi Rich

Not quite sure about the above but hopefully this will simplify things.

You bought the shop by means of the mortgage so your balance sheet should show the shop as the asset and the mortgage as matching liability. It’s reasonable to add the loan fee to the cost of the shop as it’s part of the costs incurred to acquire the asset so there’s no need to disclose it separately.

So now you’re left to with the bookkeeping for the monthly mortgage payments. Assuming it’s a repayment mortgage say, for example, your monthly payment of £500 consists of a capital element of £300 and an interest element of £200.

The double entry is:

Credit “bank” £500
Debit “mortgage account” in the balance sheet £300
Debit “mortgage interest payable” on the profit and loss account £200

There’s no need as far as I can see to transfer anything to or from drawings.

Hope this is of help.

Regards

Joy

 

[dcaccounting]

Joy has covered what you need.

Regards

Dean

 

[Rich23]

Thanks for you replies.

I have to take the capital payments as drawings though because the shop capital isnt a business expense is it?

Cheers

Rich

 

[dcaccounting]

It doesn't go to drawings it gets posted to the balance sheet to reduce the liability outstanding.

This being what Joy said:

You bought the shop by means of the mortgage so your balance sheet should show the shop as the asset and the mortgage as matching liability.

So these orignal entries would look something like this

Dr: Freehold property (asset)
Cr: Mortgage (liability)

Then the drawings entry you are refuring to would be:

Cr: Bank
Dr: Mortgage

Hope this helps

Regards

Dean

 

[Rich23]

Thank you both.

So what I have taken as drawings (ie capital payments) dont go on my P&L and dont affect my wages taken.

I thought that as they were capital payments then they had to be paid out of my personal money as they couldnt be taken through the business and used as expenses to lower the profit for tax purposes?

Take care

Rich