Mortgage Payable
Definition: Loan secured by real property
Scope:ModerateDifficulty:Easy
Loan secured by real property
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Obtain mortgage | ||
| Borrow $400,000 secured by building. | ||
| CashAsset+ | $400,000 | |
| Mortgage PayableLiability+ | $400,000 | |
| Long-term liability secured by real property. | ||
| 2. Monthly payment | ||
| Pay $3,000: $1,200 principal + $1,800 interest. | ||
| Mortgage PayableLiability− | $1,200 | |
| Interest ExpenseExpense+ | $1,800 | |
| CashAsset− | $3,000 | |
| Interest portion decreases over time as principal is repaid. | ||
T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$400,000.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$3,000.00
$397,000.00
Mortgage PayableMortgage PayableLiabilityAn obligation the business owes to others. Normal balance: credit. Credits increase, debits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$1,200.00
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$400,000.00
Normal bal. ▶
$398,800.00
Interest ExpenseExpense account — cost of borrowing money. Debits increase the balance. Credits decrease the balance.ExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$1,800.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$1,800.00
DurationLong-Term
Related Subjects
See Also
- CashPaired in entry: Record mortgage payment
External Links
- Mortgage loan — Wikipedia