How to Update Loan Balances in Quicken 2012

The Update Balance dialog box in Quicken 2012 adjusts the loan balance to whatever value you indicate, but then it forgets to categorize this adjustment. That's okay, but if you want to be slightly smarter about this adjustment, you should adjust the interest expense category.

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When you record loan payments, you split the loan payment between the interest expense category and a principal account transfer that reduces the liability. When the liability gets reduced either too much or not enough — this would be the case if you need to adjust the liability balance — you must fix the liability balance and the principal-interest split.

Let me give you an example. Suppose that over the course of a year, you record $0.17 too little interest expense — and, therefore, record $0.17 too much principal reduction, despite your best efforts to be accurate. You need to increase the liability account balance by $0.17 in this case, but you also need to increase the interest expense figure by $0.17.

If you want to be just a little bit more obsessive compulsive than Quicken is, you can do so. Simply display the loan account register, select the adjustment transaction, and then use the appropriate interest expense category for Adjustment.

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