When you sign a mortgage note, you enter a long-term agreement to repay the lender at a future date for the amount of money you borrowed. You also become obligated to make interest payments at a rate and frequency outlined in the debt agreement. You'll need to record the mortgage note to your books with a journal entry that requires two general ledger accounts -- "mortgage payable" and "cash."
Recording a Mortgage Note
Obtain a journal entry form and enter the journal date, journal number and a brief description of the journal. Go to the first line of the journal entry and enter the general ledger account number of your cash account in the column labeled "account number." Enter the amount of cash you received from the mortgage note in the column labeled "debit."
Go to the next line and enter the account number to the ledger liability account "mortgage payable" directly beneath the account number for cash. Enter the amount of the mortgage note as stated in the agreement in the column labeled "credit."
Provide the reason for recording the journal entry in the field labeled "explanation." Review the journal entry to make sure all details are correct, and that the journal totals agree. Post the journal entry to your books and review the trial balance to make sure the entry was posted accurately.
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