Proper Accounting Advice Needed

[Sam H.]

I'm trying to clean up my books and need help resetting my balance sheet - I believe I need to go back in time and essentially reset the initial entries. Basically, if someone can tell me how to set up my books starting from the closing that would be a huge help. I also need help with the proper way of accounting for mortgage payments.

I use quickbooks, so any advice you have using that software would be great. Thanks!

[James W.]

Originally posted by @Basit Siddiqi:

@Sam H.

Accounting for real estate investors may be tricky for those without an accounting background.

From closing you want to book items to the cost of the property

Journal entry 1 - To record entry for Purchase of House

          Closing cost: Title search       $2,000
          Cash                                        $10,000
          Home Inspection                         500
          Appraisal                                     $500
          Mortgage                             $187,000
Building                                                             $200,000

Journal Entry 2 - To record mortgage payment

          Cash                                                             $1,000
Mortgage                                               $400 
Escrow                                                    $300
Interest                                                   $300

I hope you now understand the concept behind it.

There are a lot of small details that you are unable to detail here. Feel free to reach out to me if you have any follow up questions.

Your first entry is backwards for the acquisition as the building should be a debit balance.