Double Entry Accounting

[Bobby Andrews]

I recently switched from QB to Stessa to manage my rentals, flips, AirBnBs, and commercial units. I love the interface and think being able to see NOI and cash flow month over month is a big upgrade from QB especially as I continue to scale. My CPA mentioned that Stessa doesn't have double entry accounting and basically told me that it will work but I'm going to spend a bunch of money every year paying him and his team to make the Stessa reports "double entry financial statements that are required to ensure every item is being captured and the balance sheet, equity & cash balances roll forward each year."

I see people using Excel sheets (which is how I've tracked my flips last year) and my CPA is basically saying the accounting is a disaster right now but it seems like other people do FAR less than me and don't have issues...is this a CPA issue?

I'm open to using different software like DoorLoop or REI Hub which has double entry accounting but switching again will take a very long time. Anyone got any insight?

[Michael Plaks]

Of course it is a CPA issue! Everything is a CPA issue. They are evil and an impediment to making money. If not for those rotten CPAs, we could deduct everything, including dog food and CrossFit memberships, pay zero taxes and finally be happy. Can't stand them.

Now, with this accumulated anger off of my chest, we can talk about your actual question. And what was that? Oh yes, double-entry accounting... Also evil, by the way.

If your real estate business is filed as part of your personal tax return, which would be the case without an LLC or with a single-member LLC, then double-entry accounting and Balance Sheet are not needed. KISS.

If your real estate business is operated via a partnership or a corporation, and they file their own tax return - then yes, your tax return must include a proper Balance Sheet. You can produce it three ways:
1. Ongoing double-entry bookkeeping. Stessa cannot do that. Plus, it would require you understanding double-entry bookkeeping. Most investors don't, resulting in messy and useless QuickBooks reports.
2. After-the-fact double-entry reconstruction. As your CPA said, it's labor-intensive and expensive.
3. Generating a Balance Sheet without full reconstruction. Still costs money but less than the previous option.

By the way, QuickBooks could be used for your NOI/cash flow tracking, with some effort and modifications. Granted, QB was created for accountants, not for investors.