My client has had 5 properties for a couple years and wants to start using QBO starting with Jan 1, 2022. Since the buildings were bought before and have had payments made to the associated mortgages before 1/1/22, I need help in setting up the chart of accounts and posting the properties and their mortgages as of 1/1/22. The problem I'm having is that normally I would credit a bank account for the down payment and of course then the down payment and mortgage would offset the debit of the building in the journal entry, but in this case I don't know about crediting the bank account since that transaction was way in the past. Does anyone know how to handle a situation like this?
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Having an equity account for each property is a great way to do it. I just used that as a placeholder. You may want to name the equity accounts something like "123 Main St. Opening Balance Equity" or add a memo to an account called "123 Main St." indicating that it was created to represent the opening balance equity.
Hi there, @desireeb.
Thanks for visiting us here. I'll share some information about recording mortgage. This lets you show the principal, interest, and escrow payments. Since these accounts will served as for illustration purposes only, I'd still recommend consulting your accountant for the accounts you need to use.
You'll have to create the following accounts:
To do so, just go to Accounting, Chart of Accounts, and then select New. For the detailed steps, check out this guide: Add an account to your chart of accounts in QuickBooks Online.
For recording mortgage payments, you can create an expense transaction dated January 1, 2022. If you're trying to record it using a journal entry, you can seek assistance to an accounting professional. This way, you're debiting and crediting the right accounts.
I'm also adding this link to help you manage other QuickBooks-related tasks. It contains topics with articles to guide you along. Just look for a title that'll fit your concern: View all help for QuickBooks Online.
Please don't hesitate to swing by if you have follow-up questions about mortgage accounts. I'll be around for you. Take care and have a great day ahead.
When setting up each property, you want to know the original cost and the 1-1-22 loan payable balance. Then, you can enter each property with a journal entry dated 1-1-22:
Debit | Credit | |
Building (Original Cost) | XXX | |
Loan Payable | XXX | |
Opening Balance Equity (to balance) | XXX |
Then, you can enter the 2022 monthly payments as usual.
Thank you! I was thinking if it wasn't a bank account, it would have to be equity. But a quick follow up question I also have is, is it ok to set up an equity account for each property to use for that journal entry individually for each one? Or does it have to be the Opening Balance Equity account?
Having an equity account for each property is a great way to do it. I just used that as a placeholder. You may want to name the equity accounts something like "123 Main St. Opening Balance Equity" or add a memo to an account called "123 Main St." indicating that it was created to represent the opening balance equity.
Thanks again! Really appreciate the help!
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