Land contract

KH1971 · ‎April 06, 2021

I have a land contract (buyer) agreement and I need to know if I’m making the correct entry for the purchase.
Original amount 50,000

Initial deposit 5,000

Down payment 10,000

Is the entry as follows:

Db 50,000 to land account

CR 15,000 to Cash

CR 35,000 to Land Notes Payable

Monthly payment of 400.00 to seller each month until end of contract

1. The monthly payment will be paid by check from business account each month which is setup in QBO

When the payment posts how should the entry post to the payable account to reflect loan amount balance?

Rustler · ‎April 07, 2021

yes the journal entries are correct

when you make the payment use the liability account as the expense (reason) for the payment, that will pay down the loan balance. If each payment includes an added amount for interest, that interest paid is an expense and you should split the payment between the liability account and interest expense

View solution in original post

Rustler · ‎April 07, 2021

yes the journal entries are correct

when you make the payment use the liability account as the expense (reason) for the payment, that will pay down the loan balance. If each payment includes an added amount for interest, that interest paid is an expense and you should split the payment between the liability account and interest expense

KH1971 · ‎April 07, 2021

Thank you Rustler for the information that was helpful. Yes when the payment is made it will include the interest amount as well.

I have a follow up question. We have a Lowe’s account linked and a transaction recently came through for which I already had manually entered as an expense to the credit card line. I may have made a mistake because the COA line now has QBO balance as 2700.00 and bank balance as -2700.00 but not sure why the bank balance is -2700.00 it’s a little confusing. Why would the charge come through as negative there hasn’t been a payment made yet.

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