What account should I use to offset an adjusting entry?

I run into this (loan balance in QB differs from Bank) often. I am going to suggest you delete or void the journal entries and start over. (you could use a journal entry and when you credit the loan you debit interest expense as those two go hand in hand - but journal entries are not always the best way to go and you cannot track the transactions correctly with a JE, not to mention a JE bypasses Cash vs Accrual))

If the debited payments to lenders were correct then your difference comes from application of individual payments between principal and interest. The simplest and most straight-forward way to correct the difference is in your final payment for the year. You will need two pieces of data

1. total interest paid in 2019

2. total principal paid in 2019

By looking at the loan account balance as of 12/31 in QB and compared to what the bank reported you should know how much "off" the annual payment of principal was. Example, QB says loan balance is 12,283 and bank says 13,190 well that means you applied 907 too much to principal. Even if your monthly payment was less, open the final payment in December for editing. Add a line for principal (same as you already post to) and enter a negative ($907 in my example). Next add an additional line for Interest (+$907) your net check remains the same and once you save it your loan balance should now match the bank.

Now you need to review the total of interest just to verify that interest was the only other transaction. The bank gave you a total for the year - you need that to match.  Easy way to find out is run P&L, customize, filter for just Interest Expense as the account, and select the Bank Name as the Name. If you pay the same bank for more than one loan you might have to filter further but what you get in the report should match what the bank said.  If there is a difference, ask yourself (and check statements) were there any late charges or account maintenance fees you paid that are not considered interest? If so and not accounted for you go back to that last December payment to edit again, adjusting the interest as an offset to Bank Fees

Thank you! That's very helpful. I've started with one of the accounts, and I got the N/P to the correct balance, however, the entry resulted in a very large amount going to Interest Expense, but we only paid $447 in Interest Expense on this vehicle. I discovered some of the entries to that account are incorrectly categorized (i.e. payments for different vehicles being put towards this one). Since the excess amount over that $447 was not from Bank Fees/Interest, what account would it go towards?

Now that I've updated the other accounts, those accounts led to a reduction of Interest Expense, and both of those adjustment amounts were greater than the Interest Expense for the year according to the bank. Neither account had any additional fees/interest, so I have the same issue as to what account that excess of interest goes to.

The net amount of those entries caused our Interest Expense for 2019 to be less than what was reported before (1 very large increase mentioned in the previous reply, and 2 decreases, 1 being much bigger than the other, as a result of the entries mentioned in this reply above).

edsa,

I am a similar problem. Did you ever find out what account that the excess goes to?

Rob

Hi there !! 

I am closing the financials for February . I have negative amount for -3.96 in my checking account which I was not able to reconcile  . Which two JA entries should I use to offset this difference ? Thanks