GAAP - Chart of Accounts - Down Payments

[Matt P.]

I'm creating a Charter of Accounts for our new buy & hold business.  I'm obviously not an accountant but I'm trying to follow GAAP practices so my P&L and Balance Sheets look solid for the bankers...

What type of account is the correct choice for the Chart of Accounts "Down Payments?"  To be clear, I mean the down payment money we spend when we purchase a property.

• Asset - NO
• Cash - NO
• Liability - NO
• Capital - ?
• Income - NO
• Expense - ?

Expense Accounts show on P&L.  Capital Accounts show on Balance Sheet.  So my guess was Capital Account.

I have the same question on Rehab expense.  Is that Capital Improvements?

Thanks

Matt

[Blake Meester]

I appreciate the offer.

I would track them in the same account because, for tax purposes, they are the same. An example would be that you can sell the closing costs without the property, the tack with the property. That being said, I don't think anyone would blink if there were two asset line items.

Keep the reader of your financial statement in mind. who is the user? What is the purpose of the F/S? What is the reader used to seeing? Wow will they use the financial statement? 

You want to make it easy for them to run their numbers and ratios.

Happy banker = $ 

Good luck!