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Help on Rental Property, Mortgage Payments, Journal Entries, etc.

Matt_UKTXMatt_UKTX Member Posts: 3

Hi,
I use Wave to manage a small business. Up to this point I have just used it to record and manage entries from a business checking account, but I recently inherited a property, which I have transferred to the business as a rental property. I've been experimenting with Journal Entries, but I must be doing something wrong...

Here are the details:
The property is worth $148,000. There is a mortgage for $92,500 on the property and we have equity of $55,000 (on paper)

To record this I created a journal entry debiting the "123 Happy St - Real Property" (Fixed Asset) account for $148,000 and crediting the "123 Happy St - Mortgage Loan" (Liability) account for $92,500 and the "123 Happy St - Equity" (Equity) account for $55,000. This appeared to work OK.

Now I am making mortgage payments from my linked checking account and I want to record those. How do I do this so the equity goes up, the mortgage goes down and it all ties to the checking account transaction log? This is what I did, but I know it's wrong...

I created a journal entry crediting my "Checking" account for $725 (the payment amount), and debiting the "123 Happy St - Mortgage Interest" (Expense) account for $375 and debiting the "123 Happy St - Mortgage Loan" (Liability) for $350. However, this doesn't increase the "123 Happy St - Equity" account, which should now have increased by $350 also (as I have $350 more in equity than I did previously).

I know I am doing something wrong, but can't figure it out. Would welcome some help!

Thanks...

edited December 3, 2018 in Accounting Technical Support

Comments

  • MerlinAccounts_UKMerlinAccounts_UK Member Posts: 177 ✭✭✭

    As you have chosen to, in essence, "sell" the property to the business, the equity you put in neither increases nor decreases from the initial transfer of the asset and liability. You are not adding to your own equity when it is your business that is paying the mortgage, but the business will of course be increasing it's net equity in the asset as the difference between the asset and liability increases, thus increasing the business net asset value.

  • MerlinAccounts_UKMerlinAccounts_UK Member Posts: 177 ✭✭✭

    @Matt_UKTX

    Did that make sense for you?

    Regards

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