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- Dec 27, 2017
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Hello - I am a lender who needs to know how to set up my accounting system (using xero).
The transaction looks as such:
1) Investor money comes in
2) Investor money collects into account
3) Borrower requests to borrow money and give a trust deed (note) as a security on a property (for fix and flip)
4) Borrower repays money upon completion of his project back to us
5) The investors may or may not get their funds back. They may choose to invest them into the next project.
6) Need to enter a manual journal (I think?) that shows funds moving from one property to another (aka one loan to another)
So far I have the following accounts set up but something is a bit wrong (I think)... The balance sheet doesn't quite work out if I don't have a "Note" asset account, but the way I'm doing it there seem to be too many accounts...
- Investor Capital (money sent by investors) (liability)
- Trust Deed Acquired/Reconveyed - funds disbursed to the borrower (equity? account)
- Note (Asset) - this is credited and the Trust Deed account is debited when the note is obtained (asset)
- Note is debited and trust deed account credited when the borrower returns us the funds
- The Investor Capital account is credited from the trust deed account
- The Investor Capital is then debited and the Trust deed account is credited if funds move from one note to another
- If the investor gets the funds back then we have a debit on the investor capital account (liability account)
Do I need the intermediate Trust Deed account? Maybe I don't? Then what would serve as the equity account if I didn't have that? We get back more money than we lend/used to purchase the note so that extra money has to go some where. I have been putting it into interest accounts --> Interest received on investments. And I have been paying it out using yet another account called "Investor payable interest."
Maybe I have too many accounts.
The transaction looks as such:
1) Investor money comes in
2) Investor money collects into account
3) Borrower requests to borrow money and give a trust deed (note) as a security on a property (for fix and flip)
4) Borrower repays money upon completion of his project back to us
5) The investors may or may not get their funds back. They may choose to invest them into the next project.
6) Need to enter a manual journal (I think?) that shows funds moving from one property to another (aka one loan to another)
So far I have the following accounts set up but something is a bit wrong (I think)... The balance sheet doesn't quite work out if I don't have a "Note" asset account, but the way I'm doing it there seem to be too many accounts...
- Investor Capital (money sent by investors) (liability)
- Trust Deed Acquired/Reconveyed - funds disbursed to the borrower (equity? account)
- Note (Asset) - this is credited and the Trust Deed account is debited when the note is obtained (asset)
- Note is debited and trust deed account credited when the borrower returns us the funds
- The Investor Capital account is credited from the trust deed account
- The Investor Capital is then debited and the Trust deed account is credited if funds move from one note to another
- If the investor gets the funds back then we have a debit on the investor capital account (liability account)
Do I need the intermediate Trust Deed account? Maybe I don't? Then what would serve as the equity account if I didn't have that? We get back more money than we lend/used to purchase the note so that extra money has to go some where. I have been putting it into interest accounts --> Interest received on investments. And I have been paying it out using yet another account called "Investor payable interest."
Maybe I have too many accounts.