DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Recording debts and payments


#1

I am wondering how to record debts such as vehicle loans, credit cards etc. Bearing in mind that some of these debts aren’t paid off in full, when a new statement is issued, there may be additional interest which is then not going to equal the previous balance, less the amount that’s been paid.

What is the best way to record these items? And to record the payments against them? I’ve seen a few things that say create them as a bank account but that’s really not working because when I allocate a payment the payment is coming out of the real bank account where the money is.

I would have thought these would have been some kind of liability but I can’t figure out a way to put in a balance for the debts

Hope that makes sense.


#2

A loan will be a liability. You’ll want to create a new account for it. Credit cards can be liabilities or can be treated as additional bank accounts. There is no reason you cannot have multiple accounts. Check out the Guides on setting up your chart of accounts. You sound fairly new to accounting. Go to http://www.accountingcoach.com for easy-to-understand principles of double-entry accounting.


#3

Credit cards should be created as bank accounts under Bank accounts tab. The only issue right now is that negative balance in credit cards will show under asset account called Cash at bank which is a bit annoying but will be resolved next month.

As per other loans, they are best to be created as accounts under Liabilities category in your Chart of accounts.

Your loan repayments will usually have two parts:

  • Principal
  • Interest

So when you spend $500 to repay loan, $450 might be principal and the remainder $50 is interest, you need to split the payment so $450 goes to offset your liability account which represents balance of the loan and $50 should be categorized to expense accounts called Interest paid.

Anyway, as @Tut said, http://www.accountingcoach.com is pretty good site to learn double-entry accounting principles which are applicable not only to Manager but to any accounting system.