Trying to understand loan accounts...


D

Duncan

I'm using Money2004 after converting from Q*k*n and I've been setting up a
Loan account to track a loan I've taken out. My instinct as an accountant
familiar with double-entry principles tells me that somewhere there should be
an asset (or cash receipt) associated with the loan before it starts getting
amortised. Otherwise I cannot see where the wizard puts the principal which
I've received - Money seems to set up the loan completely disconnected from
anything else. Isn't that a bit weird - it sort of pops the loan into
existence without reference to anything else?

After reading various suggestions on this site and doing some experimenting,
I think that declaring the loan as having an associated asset (almost at the
end of the wizard) and giving a new account with the principal receipt as the
opening balance seems to do what I want. I can then transfer the asset
balance into my bank account leaving the "principal asset account" as balance
zero. (I guess you can then clsoe the account but I haven't tried that.)

This makes sense to me - I offer it as a suggestion for others.

Wouldn't it be easier for Money to offer this as an option during loan
set-up? That is, to ask "Do you want to record the principal of this loan as
a receipt into another account? Y/N"

I didn't like the idea of idea of making a transaction without a category
assigned as that is a bit like a "single-sided entry" which is anathema to
the double-entry brigade. :)
 
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C

Cal Learner

This makes sense to me - I offer it as a suggestion for others.
I think you understand quite well.
Wouldn't it be easier for Money to offer this as an option during loan
set-up? That is, to ask "Do you want to record the principal of this loan as
a receipt into another account? Y/N"

I didn't like the idea of idea of making a transaction without a category
assigned as that is a bit like a "single-sided entry" which is anathema to
the double-entry brigade. :)
The downside is that you have then another account. You could
increase the starting balance of your suspense account, and then you
don't have an extra account in your list.
 

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