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How to have liability acrue interest but not show as payment?

Using Contractor 2006.

I have some short and long term liablilities that I want to add interest to, to increase the amount of the liability.

I don't want the accrued interest to show up as an expense in a (cash basis) P&L. I want it to show up as an expense in the future when payments are actually made to the lendor and the interest is actually paid.

I have an expense account for loan interest, and if I do a GJE that adds the interest to the liablility, and has the added interest come from the interest expense account, it shows up as an expense paid, with the P&L in either accrual or cash basis mode.

But the interest has not been paid to anyone, it's just adding to the balance of the liability.

Is there a type of account I can set up to assign accrued but not paid interest to that will not show up in a cash basis P&L?

Any suggestions?

Greg Chapp

Reply to
Chips
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Other Asset Account called Unpaid Interest?

Reply to
David Smith

Put a future date on your accrued interest entry.

Reply to
Elaine

Set up another Accounts Payable account called Accrued Interest. If you post the accrual to this account it will not show up on cash basis reports.

Reply to
Haskel LaPort

I tried this previously. It shows up as a negative (reduces) in the new the AP account. So then in the balance sheet (even in cash basis) it incorrectly reduces the AP amount.

So unfortunately, this method didn't work for me.

Thanks,

Greg Chapp

Reply to
Chips

I would not have thought of this, as I would not think of it as an asset, but I tried this, and it does not work for me, as it then skews the balance sheet.

Thanks,

Greg Chapp

Reply to
Chips

What I finally did on this, which works for the balance sheet and P&L is this.

I have no entries in Other Income and Other Expense accounts. Not that I never would, but I don't.

If I set the P&L to filter for "ordinary income/expense" and make an "other expense" account for accrued interest, then it is excluded from this P&L report. That worked.

And as an expense, it does not show up on the balance sheet, but the added balance to the liablilities do correctly show up on the balance sheet.

So that does work for me.

I don't think this is the best possible way to do it, because if I do need to use Other Expense or Other Income in the future for their normal uses, it will be excluded from this P&L.

But also, I suppose I could still make an account that is an ordinary expense account type, and label it "Other Expense" if I needed to. Same with "Other Income".

Greg Chapp

Reply to
Chips

It did not work because you do not know the QB rule concerning adjusting jounal entries and cash/accrual reporting. Any time you make a journal entry that effects a balance sheet account the adjustment will always show up on both accrual and cash basis financial statements.

Since you can't book the accrual by means of a journal entry you will have to post it as a Bill. If the debit side of a Bill does not effect another balance sheet account (in your case the debit is to interest expense) QB will not include the accrual on any cash basis statements it generates.

Reply to
Haskel LaPort

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