Entries for buying property

[Bracye]

Hi all,

I have done this so many times in the past and my brain is fried to the brim with all the accounting documents at the moment.

When I do the journal for the property home loan the entry I have is:

Land and Buildings @ Cost Debit with R1,4million
Long Term Liabilities Credit with R1,4 million

I am handling the home loan bank account as a seperate bank account on Pastel. Now where my confusion starts.

When the installment goes off the transactional bank account it will be a credit in that GL acc and a debit on the long term liabilities?

Now I have the interest that will be added on the home loan account every month. How do I do the entry for that? Should I rather handle the whole Home Loan account by journals and then just make sure the payments go toward the liability account?

Hope you guys make sense of what I'm trying to say and ask?

[Marq]

The payment is made up essential of two parts - Interest and Capital. Work these two portions out using excel/calculator/in your head.
The entry is then:-
Payment in Cash/shells/ebucks/debit order - Cr... bank account - as per the Pastel bank account mentioned
Interest - Bank portion of illision from your account - Income statement - Dr..Interest paid(finance costs)
Capital portion paid - Balance sheet item - Dr... Long term liability

[Miro Bagrov]

I agree. But I have an easier solution:

Request a Amortization schedule for the loan from the financier.

The amortization schedule will break up the capital and interest for you in that statement. Just make sure the dates requested match the financial year end!

[Bracye]

Thanks guys for the help. Done the relevant entries. Makes sense now.

[dellatjie]

Bracye,

The only part I am worried about with regard to the fact that your homeloan is treated as a cash book is that when the debit order is posted against your bank account, you post it to your home loan cash book. This transaction will not appear on your home loan account's bank reconciliation, if you are using that function.

Furthermore, the mistake that some people make, is posting the transaction in both cash books, the receipt in the home loan "cashbook" and the payment in the business bank account's cash book.

What has your experience been so far?