Chart of Accounts

[Kevin Last]

Hi! I'm still rather new to real estate investing and I've been slowly building a chart of accounts since most the accounting softwares are not set up directly for real estate investors. I tend to feel like I'm missing something or I should code an entry differently. I'm wondering if anyone would mind sharing their chart of accounts so I can set them up in advance prior to moving forward. Right now I'm just looking mainly for a set up for buy and hold but may be looking for flipping in the future. I'm not sure if people code them differently in their software. Thanks, Kevin

[Linda Weygant]

Buy and Hold Chart of Accounts should include the following:

Assets:

Checking Account

Savings Account

Tenant Deposit Account

(if you have all three - if not, whatever accounts you have)

Mortgage Escrow Account (set up as a checking account)

Rents Receivable

Prepaid Expenses

Property Asset

Other Depreciable Assets such as Furniture & Fixtures, Equipment

Liabilities:

Accounts Payable (if you're using a feature where you record your bills to be paid, then pay them out of the software.  Otherwise, not necessary)

Mortgage Payable

Tenant Security Deposits Held

Equity

Totally depends on your structure, but could be:

Owner Contributions (for sole prop)

Owner Draws (for sole prop)

Member Contributions (for LLC/Partnership/Joint Venture)

Member Draws (for LLC/Partnership/Joint Venture)

Capital Stock (for S-Corp or C-Corp)

Additional Paid in Capital (S-Corp or C-Corp)

Shareholder Contributions (for S-Corp)

Shareholder Dividends/Distributions (for S-Corp)

Retained Earnings (all forms)

If a few number of partners/members/shareholders, then one Contribution/Draw account per person/entity.  If lots, then keep good records for contributions, draws and equity splits.

Revenue:

Rental Income

Other Income

Expenses:

HOA Fees

Mortgage Interest

Property Insurance

Property Taxes

Repairs and Maintenance

Professional Fees (such as accountants and lawyers)

(Anything else on Schedule E that you do

Other:

Interest Income

Flipping Business should include:

Assets:

Cash Accounts

Mortgage Escrow Account (if appropriate)

Projects in Process (one for each project, ideally)

Tools and Equipment

Deposits and Prepaid Expenses

Liabilities:

Accounts Payable

Mortgage Payable (one for each property)

Other Loans Payable

Payroll Tax Liabilities (as applicable)

Equity

Same as above

Revenue:

Property Sales Revenue

Commissions Revenue (if applicable)

Cost of Goods Sold

Project Expenses

Expenses:

Most of your job expenses will be recorded in Projects In Process as an accumulated asset and then moved to Project Expenses when you sell the project, so there's no real need to separate out expenses such as Materials, Subcontractors, Holding Costs, Utilities, etc.  If you want to see those expenses, then a sub-category under Projects in Process would be better for initial recording.  From an accounting point of view, there's no need to break it all out.  From a management point of view, you can either keep detailed costs in your accounting software or keep a separate schedule of Budget vs Actual in a spreadsheet for each job.  As an accountant, I'd probably keep it in a spreadsheet because most budget vs actual parts of accounting programs are kinda crappy.

Professional Fees (not related to a specific job) such as Legal, Accounting

Payroll Expenses (Salary and taxes, as appropriate)

Office Supplies

Vehicle Expenses

Travel Expenses (not job specific)

Dues and Subscriptions

Advertising

Business Licenses

Etc....