We are a new user to QB Desktop Premier 2021 Contactor Edition and still in set up mode. Our testing within the Sample Company data has raised issues.
ISSUE 1: Consistent with good financial accounting practices and the format of Form 1065 Partnership/LLC tax returns, the accounting of commercial property Rental Income and Rental Expense is not a Trade or Business and needs to be categorized and shown below the standard and non-changeable income statement line of Net Ordinary Income. Thus, the accounting has to be within the the standard and non-changeable Other Income and Other Expense sections that then lead to Net Income. All good so far.
We need a Rental Profit subtotal, being Rental Income less Rental Expense. And then we need other accounts further down in the the Other Income & Expense section for Capital Gains, Interest Income, K-1 Allocations, Other Deductions, etc. But the software only allows one Other Income grouping followed by one Other Expense grouping. No more, from what we can tell.
How do we get the Rental Profit subtotal, without showing Rental Expenses as negative Other Income items, if we can't nest several Other Income/Other Expense groupings together? It would be bizarre to have trade or business Operating Expenses above the line as positive numbers and property Rental Expenses below the line as negative numbers.
ISSUE 2: To create subtotals, we added accounts that are intended to be non-posting and linked other accounts to be subtotaled. Fine. But QB shows those (as highlighted in orange) as a posting account and added "-Other" to each. The Chart of Accounts does not seem to have a setting for a header account to be a non-posting account, from what we found.
Does anyone have solutions or a workarounds?
Welcome to QuickBooks Desktop and to Community, Bruce White.
I can share how you can organize those accounts on the Profit and Loss (P&L) report. For issue 1, the only way to group other income or expense accounts is to make them a sub-account.
To issue 2, all accounts on the P&L report are posting accounts. Entries are set by a transaction type, not by accounts. If you create purchase orders or estimates, they're non-posting transactions.
I've also added this link to know how QuickBooks organize your transactions on your reports: Understand the Chart of Accounts.
Stay in touch with me if you need additional information by commenting below. I'll be around to help you.
MaryLandT, thanks for looking at my issues.
First, I had attached a marked-up Income Statement (created from within Sample Company) to help anyone follow along but it may not have gone as I cannot open it from the post. Here it is again.
On Issue 1, I am aware how to link a sub-account to its parent account. But the issue that I describe is several levels above that (i) taking into account my accounting objectives, and (ii) the apparent QB Desktop limitation of having only one set of "Other Income" followed by one set of Other Expense" accounts below Net Ordinary Income . Could I ask you to please re-read Issue 1 (hopefully, with the detailed attachment) and see if you have an answer and, if not, I understand.
On Issue 2, I researched it more within Sample Company and you are right. "Car/Truck Expense" is an example of an Income Statement account that has sub-accounts attached to it and is listed as the last entry in the list with "Car/Truck Expense-Other". That's fine because, in a regular report that we would normally set to only print accounts with activity, those header-accounts will not appear. And if an amount gets posted there by mistake, it will print and can be reversed or journaled out.
Bruce, thanks for reaching out. Let me add some insight.
When you have sub-accounts of income or expense, and do not record an income or expense to one of the specific sub-categories those transactions are all grouped and reported as "Other". For each partcicular nexted category there will only be one "Other" account reported. You can reclassify items to get them into your sub-accounts and reduce or eliminate any "Other" transactions.
Now, specifically to rentals in partnerships. Your P&L from rental activity will be reported on a form 8825 (similar to Schedule E used for individuals, but for partnerships). There is only 1 income category, which is Gross Rents. All expenses are below the line in the expense categories. Thus, even though in your QB books, you might have multiple income accounts that generate money from tenants (such as late fees, eviction judgments, application fees, parking space charge, etc) you would group all of those on the 8825 as Gross Rent.
Other property income, such as laundry or other service fees should probably end up on the 1120S in the business area. This is also where you would place any expenses that are not property specific, which could include interest payments to partners that you do not allocate by property. Just one example.
There may be in the end income and/or expenses that are not on the 8825 but instead on the 1120S and other than rental profit you could have a loss in that section