Mark, Your property is an asset which you own hold and control. The connection between it and the liability that the loan represents is established at the time you took out the loan. From that point forward they are treated separately in accounting.
Changes in the details of the loan do not affect the asset only the liability. So the change to a line of credit is reflected totally in the liability account for the loan. The only time the loan and the asset might interact in the future is in the event of foreclosure of the loan. The difference between the asset's current value and the outstanding loan amount does however give you an estimate of your equity in the property The only things which will affect the value of the asset are things like changes in property values in the area, depreciation and market forces. However these events are not realized until the property is actually sold. If you have reliable estimates of these changes you can certainly record them. A common procedure is to record the initial purchase value of the asset in a subaccount of an overall placeholder account for the asset and record any unrealized changes in a contra account. The account structure will look something like: Assets:Fixed Assets:Condo Assets:Fixed Assets:Condo:InitialPurchase Assets:Fixed Assets:Condo:Improvements capital improvements to the asset Assets:Fixed Assets:Condo:UnrealizedValueChanges You would need a corresponding account under equity Equity:Condo:UnrealizedValueChanges If you make a capital improvement to the property the recording will look like Assets:CurrentAssets:Bank Cr xxxxx Assets:Fixed Assets:Condo:Improvements Dr xxxxx If you are recording an increase in the property's market valuation Assets:Fixed Assets:Condo:Improvements Dr yyyy Equity:Condo:UnrealizedValueChanges Cr yyyy and similarly a decrease in market valuation Assets:Fixed Assets:Condo:Improvements Cr yyyy Equity:Condo:UnrealizedValueChanges Dr yyyy If you are spending money on the property but it is for consumables which don't add to its long term property value you would record the expenditure as an expense as normal. The unrealized value changes would not be subject to taxation in most jurisdictions (but not all). *DISCLAIMER: The above is only a generic illustration of how you could record such transactions in GnuCash and should not be construed as advice on how best to record for your jurisdiction. You will need to consult a local accountant for specific advice relevant to your particular situation.* Should you sell the property, then you would have to apply a reversal of the total current balance of the unrealized value changes (it may be positive or negative if the market has dropped) cancelling that balance contribution to the assets and equity and then record the actual sale of the property for the actual sale value including the paying out of the residual mortgage value. Alternatively you can do a correction to the unrealized value changes to bring the total value of property to the sale price. This will give you the actual gain or loss on the property for any capital Gains Tax purposes if needed. If your jurisdiction applies gains and losses from market value fluctuation, the calculations are much more complex and you will need to apply your applicable taxation legislation and your accountant. David Cousens ----- David Cousens -- Sent from: http://gnucash.1415818.n4.nabble.com/GnuCash-User-f1415819.html _______________________________________________ gnucash-user mailing list [email protected] To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. You can do this by using Reply-To-List or Reply-All.
