Trying to understand loan accounts...

[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.

 

[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.