Budget Bookkeeping Question

Budget Bookkeeping Question

Budget Bookkeeping Question

How can I accurately include the mortgage principal payment as a monthly expense in my budgeting process, considering it is categorized as a liability account and doesn't appear in the QuickBooks Accounting Software budget?

I want to ensure that my budget reflects the true cost of the mortgage and helps me track my overall expenses effectively.

Is there a workaround or alternative method to incorporate the mortgage principal payment into my budget calculations?

I want to maintain accurate financial records and have a comprehensive view of my monthly expenses.

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Aug 17, 2023
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starstarstarstarstar 		Mortgage Principal Payment
by: BB

When using QuickBooks Accounting Software, the principal portion of your mortgage payment is a reduction of a liability (the loan balance) rather than a direct expense. This is why it doesn't automatically show up in your expense budget. The interest portion of the mortgage is an expense and will be reflected as such.

Here's a workaround to incorporate the mortgage principal payment into your budget calculations:

Create a "Mortgage Principal" expense account: Even though the principal isn't technically an "expense," this step allows you to see the cash flow in your budget.

Record the entire mortgage payment as an expense: When you make a payment, initially record the entire amount (both principal and interest) to the "Mortgage Principal" expense account.

Adjust for interest: Next, make a journal entry to reduce the "Mortgage Principal" expense account by the interest portion of the payment and increase the actual interest expense account. This leaves only the principal portion in the "Mortgage Principal" expense account.

Reconcile the liability: Now, make a second journal entry to decrease the "Mortgage Principal" expense account and reduce the mortgage liability for the principal amount. This will show the reduction of your mortgage liability accurately.

By following this method, you can see the full mortgage payment (both principal and interest) in your budget and still reflect the correct interest expense and liability reduction in your financial statements.
Jul 17, 2023
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starstarstarstarstar 		How to Create a Budget
by: Stephanie

When it comes to including the mortgage principal payment in your budgeting process, even though it is classified as a liability account and not directly visible in the QuickBooks budget, there are a few approaches you can consider.

One option is to manually add the mortgage principal payment as a separate line item in your budget spreadsheet or budgeting bookkeeping software. By doing so, you can allocate a specific amount each month towards the principal payment, ensuring it is accounted for in your overall budget.

Alternatively, you can create a custom expense category within QuickBooks specifically for the mortgage principal payment. This way, you can assign the principal payment to this category when entering transactions, and it will be captured in your budget reports.

Lastly, if your budgeting software allows for the creation of custom accounts or sub-accounts, you can set up a sub-account under the liability account for the mortgage and assign the principal payment transactions to that sub-account. This approach helps track the principal payments separately within the liability account while still reflecting it in your budget reports.

Ultimately, the goal is to ensure that your budget accurately reflects all aspects of your financial obligations, including the mortgage principal payment. Choose the approach that works best for your specific budgeting needs and software capabilities.

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Budget Codes

by Barbara Welsh
(Reno, NV, USA)

Budget Codes

Budget Codes

What are budget codes or coding? And how do I find out codes?

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Aug 17, 2023
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starstarstarstarstar 		Budgeting Code Process
by: BB

Budget codes, often simply referred to as "codes" or "coding" in financial contexts, are alphanumeric identifiers assigned to various expenses, revenues, assets, liabilities, and equity items in an accounting system or a budgeting process. These codes provide a systematic way to categorize, track, and analyze financial data. Using budget codes simplifies the process of reporting, ensuring consistency across different departments or projects, and helps in maintaining a structured financial database.

To find out or determine the codes:

Refer to the Chart of Accounts: In many accounting systems, the chart of accounts will list all account codes used by an organization.

Consult with the Finance or Accounting Department: They often maintain a list of all budget or accounting codes and can provide guidance on how to use them.

Check Budgeting or Financial Software: If your organization uses software for financial management or budgeting, it likely has a feature or section where budget codes are listed.

Review Past Financial Statements or Reports: Past reports often use budget codes, which can give you an idea of the codes used for different items.

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