The cash transactions affecting this account are checked from the cash book, while the amount of the principal is obtained from the report of sales, from the property ledger, or from the journal.

It will frequently be found that some of the mortgages are second mortgages, especially in cases where the original first mortgage was given to enable the owner to complete certain improvements, but was found insufficient in amount so that a second mortgage was given for a further advance. All such facts should be clearly noted on both of the sub-ledger accounts relating to the property, the original mortgage being marked, "See Mortgage No..... for second mortgage," and the second mortgage marked, "Second mortgage to No....." Both mortgages should be shown on the property ledger.

A schedule of these mortgages should be prepared to accompany the balance sheet, showing the number, name of mortgagor, and unpaid balance of each, together with the total of interest and charges; and this schedule should indicate clearly all mortgages other than first mortgages. The total must agree with the Mortgage Receivable account in the general ledger, and the columns for charges must equal the sum of the following accounts:

Overdue Mortgage Receivable Interest Mortgage Insurance Mortgage Expenses Mortgage Taxes

The auditor should carefully examine each account and, when necessary, show, either by footnotes or supplementary schedules, all mortgages on which either principal or interest is unduly in arrears.