Mortgages - Acting for seller and bank

Question 1

Example - Question

Answer 1

You act for Kelly Jacobs who is selling a property The saltings, which is subject to a mortgage in favour of Uni Bank. The amount required to redeem the mortgage is £238,000. Completion of the sale takes place on 19th September. On 20th September the redemption monies are sent to Uni Bank. How will you record this using double entry bookkeeping?

Question 2

Answer - Completion of the sale

Answer 2

This is recorded as a credit of £475,000 on the client side of Kelly’s client ledger and a debit of £475,000 on the client cash account

Question 3

Answer - mortgage redemption

Answer 3

The redemption monies must be transferred to Uni Bank by making a credit entry of £238,000 on the client side of Uni Bank’s client ledger and a corresponding debit on the client side of Kelly’s client ledger. On 20 September when the redemption monies are sent to Uni Bank to discharge the mortgage a debit entry for £238,000 will be made on the client side of Uni Bank’s client ledger and the corresponding credit entry will be made in the client cash account as money is being paid out of the client bank account by the firm to Uni Bank