Mortgage: Interest Account?

Question for the group:

Should there be an account or something listed here for Interest?



This is what my split looks like.  Note that the Interest line (Line #2) is a category and not an account.  This has always seemed odd to me.





Chris
Quicken user since 2014.
Using Quicken Windows Subscription on Windows 10.

Answers

  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    In Quicken-speak, "Accounts" refers to Balance Sheet line items - checking, savings, loans, investments, and so-forth.
    In Quicken-speak "Categories" refers to line items that would show up in an Income and Expense or Profit and Loss statement - salary, rent, mortgage interest, etc.
    This is a distinction unique to Quicken as all of these line items relate to "accounts" as that term is generally used by real accountants.  There's "balance sheet" accounts and there's "income and expense" accounts.
  • NotACPA
    NotACPA SuperUser, Windows Beta Beta
    edited April 2020
    @Chris Harris, I'm not sure what your 1st graphic is showing ... but your 2nd graphic seems to be entirely correct.
    SHOULD you create an "Interest Account", then each mortgage payment would serve to INCREASE the balance in such account and would offset the DECREASE in your checking account for the Interest payment. That would be a transfer from your checking account to your "interest account", which makes no sense.  After you make this (interest portion) of the mortgage payment you're poorer ... you're not moving money from one pocket to another.
    Your "Mortgage Principal ..." account should be a liability ... you owe money.  So transfers into it bring the amount owed closer to $0.
    The "Mortgage Escrow" account should be an asset.  Here you ARE moving money from one pocket to another, until such time as your RE Taxes and Insurance are deducted from the Escrow account.
    Q user since DOS version 5
    Now running Quicken Windows Subscription, Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • Chris Harris
    Chris Harris Member ✭✭✭✭
    edited April 2020
    @Tom Young , thanks for the background.  Wish I knew more about how real accountants operated with their "Chart Of Accounts".

    @NotACPA , sorry, the first screenshot is just showing the three accounts associated with my Mortgage listed to the side of Quicken...where it shows a summary of every account's balance.

    Maybe I have something messed up with my Escrow (taxes & insurance) account because I only ever have Debits into it and never Credits.  Although I don't know what bank I would link it to since all of that just seems to magically happen on the back end.  The balance of that account is around 12K which can't be right. 

    Chris
    Quicken user since 2014.
    Using Quicken Windows Subscription on Windows 10.
  • Tom Young
    Tom Young SuperUser ✭✭✭✭✭
    Just to make sure....  You do understand that there's no "Account" (as Quicken uses that term) associated with your interest expense, right?  That expense is properly recorded, in Quicken, in the "Category" Mortgage:Interest and you see those amounts on Spending reports, not on Net Worth reports.

    "Maybe I have something messed up with my Escrow (taxes & insurance) account because I only ever have Debits into it and never Credits."
    I'm not sure where you are in the life of your loan.  Each monthly payment should result in a debit to the escrow Account and it's not until the financial institution actually pays money out of that account - property taxes, say - that the Account would record a credit.  I would guess that there's no way to download information into your escrow AccountOnce the financial institution makes a payment and notifies you of this, probably on your monthly statement, you have to go into that Account and make the entry yourself:
    Debit (increase) Property Taxes (a Category)  $XXX
    Credit (decrease) Mortgage - Escrow (an asset Account)  $XXX
    I'm not sure what you're referring to with your "magically happens" reference.  Entries into Quicken happen one of two ways: you make them manually, or the entries are downloaded from some financial institution.  Not all Accounts can actually be linked to a financial institution even if the financial institution actually controls the account.
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