Real estates set up

Question?

Under improvements, would you then create sub-accounts for those improvements (i.e., installation of new driveway, new roof, new fencing, etc. ) as some of these items are capital improvements and may be depreciated?  Also, what about appliances?  

Thanks.

The purpose of the Asset account is to track the real estate basis value, for depreciation purposes (as well as resale). So I would only put improvements in the Asset account that increase the basis value of the property which will then effect the depreciation schedule.

The treatment of appliances is a matter of preference. I would consider the purchase of the property including all appliances as part of the basis and depreciate the property. If you wanted to get more complicated, you can split off the appliances as their own assets, and lower the basis of the property accordingly. This will lower the basis of the property, which might increase capital gains taxes at resale. The benefit would be deducting the cost of the appliances as a write off the first year, since the appliances would be below the cap limit for fixed assets (typically $2500 ea).    

Hi,

Thanks for the compliment, but I'm a business owner, and learned (learning) accounting as I go. 

I'll get in touch with you. 

What I learned this year about quickbooks is to setup quickbook accounts according to the tax form categories. Or better yet, MAKE SURE TO SET THE APPROPRIATE TAX LINE in the QB Accounts you setup. 
Otherwise, the QB import into TurboTax will be a rough process! 

Hi Anonymous. QB removes email addresses from posts, so I won't be able to email you. I'm not sure how members of the QB Community can contact each other - might want to ask Intuit about that! 

---

@Anonymous wrote:

AJ I saw your comment for RE Investment for Quickbooks on another post. Are you a bookkeeper?  Interested in discussing more about it. Email me at [email address removed]

---

After some thought, I need to correct my answer above. 

Appliances should NOT be considered as part of the Building Asset. Real Estate depreciates at a rate of
27-1/2 years. Expensive appliances depreciate at a rate of 7 years. So the two assets need to be depreciated at different amounts per year. 

As far as whether appliances (and other small capital expenditures) are "assets" or "expenses" depends on the agreement of the members of the company, or just you if you are a sole owner. Each capital purchase (appliances, furniture, tools, etc) are treated individually for depreciation purposes, NOT as an accumulated sum over the year. Some owners will expense (write off) purchases up to $1000, some owners will expense items up to $5000 or more. The IRS guidelines are very vague as to what constitutes an expense-able purchase. $2500 seems to be a common figure. 
   

I am a real estate developer.
My transaction business transactions are as such:
1. I buy land. (Expense).
2. I pay construction monies to build a villa on the land. (Expense).
3. I pay for accessories such as AC/KITCHEN/FURNITURES ETC. (Expense).
3. I sell the finished estate to a customer. (Income).

How should I set up this process to keep a track of all the expenses starting from the value of the land purchase and profits?
Should I add my lands as inventory available for sell? or should I add them in the chart of accounts as Assets?

Hi there, @sheikhislam.

Welcome to the Community. Let me share some information about how you can enter them in QuickBooks Desktop.

There are several ways to record a sale of an asset in the system. The process will depend on your situation.

You can create a new account (gain/loss) for asset sales. I suggest using the Journal entry feature to track the amount. However, please note that we can't suggest which account you should use to debit and credit.

In case you need the steps, here's how:

1. Go to the Company menu and select Make General Journal Entries.
2. Fill out the fields to create your journal entry. Make sure your debits equal your credits when you’re done.
3. Select Save or Save & Close.

Also, you'll need an account in the chart of accounts to track all costs and purchase amounts. Other users use an asset account to add these types of transactions .

When you sell, you can use the service item type for the estate sale and record the sales price, then do a journal entry. However, I highly recommend seeking expert advice from an accountant to ensure your books are accurate and error-free. They'll be able to provide some suggestions about how you can keep track of the purchase and sale of the estate.

For additional reference, you can use the following articles to learn more about the chart of accounts, as well as tracking inventory assets and cost of goods sold in QuickBooks:

• Understand the chart of accounts in QuickBooks.
• Understand inventory assets and cost of goods sold tracking.

Fill me in if you have additional questions about how to handle the transactions in QuickBooks. I'm always here to help. Take care always.