mortgage payment transaction posting in fund accounting
Posting Journal Entries in Fund Accounting
What is the proper way to post a church mortgage payment to the ledger? I know that the standard procedure in for-profit accounting is NOT expense the principal portion, but rather to increase the equity account and decrease the mortgage liability account.
However, a church accountant told me that this is not the case with fund accounting, and that the entire payment should be expensed and then a separate journal entry to reduce the mortgage and increase the equity. I would prefer the second option, but our bookkeeper insists on the first.
The problem with the first option is that our income vs. expenditure and our budget reports are skewed because they don't include the entire mortgage payment. Can someone help me and explain WHY?