I have recently paid off a loan in full which I started keeping track of in a double-entry personal accounting software. Because I was paying before I started tracking I entered the current loan balance at the time (3 years ago) with the first entry as:
- Debit >> Equity::OP BAL - $$open balance at the time
- Credit >> Liability::Long-Term::Education Loan Principal
As I made my payments from my Asset::Bank::CheckingAccount I put the interest charge in an Expense::Interest::Education Loan Interest account and the balance was debited to Liability::Long-Term::Education Loan Principal. So the entry treatment was like this:
- Credit >> Asset::Bank::CheckingAccount $My Monthly payment
- Debit >> Expense::Interest::Education Loan Interest $Interest Portion
- Debit >> Liability::Long-Term::Education Loan Principal $Principal Portion
Now this year I paid off my loan balance in full so I did the same treatment as above. Now how do I adjust the negative balance of what is left in OpBal account? Do I put the interest savings in a Equity::retained earnings to offset OpBal? Or do not book that at all and there will always be a negative balance for the original transaction. Any help is much appreciated; this has had me so confused for days now.