Flipping Houses - Journal Entries in Quick Books

[Michael Smith]

Hey BP! I'm currently mid-way through my first rehab, planning on building a scale-able business and turning over at least 5 properties next year.

Up until now my Chart of Accounts in Quick Books has been set up to handle accounting for my rental properties, but now that I am entering the flipping space I need to make some adjustments.

I'm wondering if I should count the purchase and all materials/labor as WIP and then move those costs over to COGS at the time of sale? Or, would it be easier to enter everything as COGS upfront, and at the end of the year move everything from COGS to WIP for any properties that will carry over into the next year?

Also, what is the best practice for identifying properties for reporting purposes? For my rental accounting I currently set each property up as a Customer and a Class, with tenants as Jobs. Is there a better way to do this for flipping, or will the same system work?

Thanks!

[Gita Faust]

 @Michael Smith:

There is a always a different and easier way. Which ever step you take to enter details in QuickBooks - remember that you should enter the transaction only once.  Secondly you should always think about how you want the reports to be reflected and how you look at your financials. If you add it to COGS and you sell the property next year, at the time of filing your reports will be inaccurate and your tax returns. Your Net Worth is wrong. You will not have a clue what your assets and liabilities are. 

Best practices to use QuickBooks for real estate industry is to use Classes for each property. You can get quick reports - summary and details by each property. Profit & Loss by Class report and Balance Sheet by Class.