Mortgage on Business Property

[Qbookslave]

Took over books from another bookkeeper. She was only recording the interest portion of the mortgage on the business property. I informed client that the entire amount of the mortgage payment goes on the P&L as an operating expense and he's confusing personal income tax deduction of mortgage interest with a business P&L. He's stubborn and wants it done as before.

Anybody disagree with me? Should I decline the assignment, since he's just going to be paying excess taxes?

 

[Triest123]

See this link, you would know the accounting for the mortgage payment.

Accounting Principles II: Mortgage Payable

 

[Qbookslave]

Thank you

Yes, I am aware that the full amount of the mortgage payment is expensed to the business. This client has been misinformed and his tax accountant has approved it. He wants me to book only the interest.

 

[ArcSine]

Yes, the client was misinformed; the misinformation occurred when you

...informed client that the entire amount of the mortgage payment goes on the P&L as an operating expense

Re-read Triest's link.

 

[kirby]

Time out, Qbookslave. When you make a mortgage payment, part of it reduces the Mortgage loan debt and part is interest expense. Is the mortgage loan debt NOT on your books?

 

[Qbookslave]

Client's former bkkpr was booking only the interest. The debt is on the books and of course is reduced by booking the portion of the payment that goes to principal.

 

[Qbookslave]

Y'know, you're right, guys. What was thinking? The partial return of principal is not an expense, just a reduction of the liability. Man, am I rusty.

 

[CPAInsider]

Yup you got it. Can be tricky when thinking and comparing to personal taxes.