Hi, RsH.
John has told you how to do it in Quicken - and I'm glad because I haven't actually had occasion to learn how in Quicken.
The theory is pretty easy, though. You increase one asset - your [bank] account - by the full amount of the payment received and deposited. You record the amount of interest included in the payment received as income - Interest Income Category. And you decrease the other asset - the mortgage principal - by the difference.
In Accountant-speak: Debit Bank Account $1,000 Credit Interest Income $ 200 Credit Note Receivable 800
Or, in Quicken-speak (if you don't use any Wizard): Record it as a Split transaction in the bank account: Deposit $1,000 Interest Income Category $ 200 Note Receivable Asset 800
In the beginning, of course, you would have made an entry to record a check from your bank account, creating a new Asset Account called Note Receivable. Each monthly entry for receipt of a principal payment would reduce the balance in that Note Receivable account until, some day, the final payment would reduce it to zero. Yes, you are transferring that amount from the Note asset to the Bank asset.
And, just a couple of terminology nitpicks (I can't help it. I'm an accountant, remember. Retired, but you don't turn off a 30-year mindset that easily.): A principle is something you believe in; what you collect on the note is principal (and interest). And you receive payments on Note Receivable, not a mortgage receivable; the mortgage is security for payment of the note. Yes, you hold both the note the mortgage, but the note is the one that holds the promise to pay and bears interest. (OK. I feel better now. )
RC