How does my mortgage factor in if I am doing cash basis accounting?

Answer by  gleverance (720)

Under cash basis accounting, there is no way to account for mortgages. Expenses are only recognized when you pay them. What most small businesses use is modified cash basis accounting, where revenue is recognized when received, expenses recognized when paid, except for certain large, long term loans, like mortgages. While it isn't GAAP, its appropriate if your a small business.

Answer by  Liz59 (10966)

Well if you are doing cash basis accounting, your mortgage and taxes will be added in as the cash component.

Answer by  rjuliet (44)

Purchase price of property: $100,000. At the time of purchase, debit real estate and credit mortgage payable for $100,000. Each time you make a payment, debit interest expense for the part of the payment representing interest and debit mortgage payable for the principal portion. Credit cash for the total payment.

Answer by  technogeek (6640)

If you are doing cash basis accounting, then your monthly mortgage payments are treated like individual credits each month. You would post each mortgage payment as a credit and not consider the total debt.

Answer by  PGR (74)

Since cash basis accounting only recognizes expenses and income when they are poaid or received in cash, only interest you have actually paid during the reporting period will be recognized as an expense. The principal portion of the payment is NOT and expense so it does not factor in at all.