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Creating a Credit Balance in QBD for future class-level expenses to be applied against.

So I run a real estate investment business where I purchase properties, perform renovations, and then sell. Currently I purchase all materials from HomeDepot with Gift Cards ($100-$1000 value each, in $100 increments) through a fundraising website that is tied to the companies operating bank account.

 

For example: 123 Main Street has a material budget of $2250. I then purchase $2500 in Gift Cards (2x $1000 and 1x$500) from fundraising site that triggers a bank draft of $2500 out of my operating checking account. I then pay for the materials totaling $2250 at HD utilizing these GC's. Currently I categorize the full $2500 debit in the check register as "Repairs&Maintenance:Materials" and tag class "123 Main Street" so the expense shows up on the property balance sheet. As you notice though I only ACTUALLY spent $2250 on materials with the remaining $250 staying on the GC for future use; which may or may not be for 123 Main Street. 

 

What I would like to do is order say $10,000 of Gift Cards and create a credit balance in QBD that future material invoices could be applied against, there-by reflecting a more accurate representation of expenses at the class level. 

 

Any suggestions? 

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Best answer 02-21-2019

Accepted Solutions
KH
Frequent Contributor *

Re: Creating a Credit Balance in QBD for future class-level expenses to be applied against.

If you intend to pay for the Gift Cards up front that would give you a "pre-paid account.  You can create an account as a "Prepaid Gift Cards" per say, making it an other asset account. As you use up the Gift Cards, you'll reduce the prepaid account and post your expenses to each property accordingly.  Anything left in your prepaid would represent "unused" amounts of your gift cards.

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3 Comments
KH
Frequent Contributor *

Re: Creating a Credit Balance in QBD for future class-level expenses to be applied against.

If you intend to pay for the Gift Cards up front that would give you a "pre-paid account.  You can create an account as a "Prepaid Gift Cards" per say, making it an other asset account. As you use up the Gift Cards, you'll reduce the prepaid account and post your expenses to each property accordingly.  Anything left in your prepaid would represent "unused" amounts of your gift cards.

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Established Community Backer ***

Re: Creating a Credit Balance in QBD for future class-level expenses to be applied against.

It's easiest to manage Gift Cards in QB using a Bank Type of account, since that gives you the data entry tools needed for good Job tracking input, using Items, etc, for the property flipping activity.

 

"Currently I purchase all materials from HomeDepot with Gift Cards ($100-$1000 value each, in $100 increments) through a fundraising website that is tied to the companies operating bank account."

 

If you Raise Funds, that is Income to you. Then, you "invest" in the Gift Card, and then you "invest" in the property, as WIP or CIP = Other Current Asset (Work or Construction In Progress). So far, nothing here is Expense and it never hits the P&L.

 

"For example: 123 Main Street has a material budget of $2250. I then purchase $2500 in Gift Cards (2x $1000 and 1x$500) from fundraising site that triggers a bank draft of $2500 out of my operating checking account. I then pay for the materials totaling $2250 at HD utilizing these GC's. Currently I categorize the full $2500 debit in the check register as"

 

No, you cannot use the Register view for this. And, No, that is not Repairs or Maintenance. You are Investing in the property. You told us this is your Operations:

 

"where I purchase properties, perform renovations, and then sell."

 

You accumulate the invested costs as Other Current Asset. It's not Expense.

 

"and tag class "123 Main Street" "

 

Banking menu > Write Check. List the Items on the Items tab; they link to Other Current Asset. Job Track it here for that property as Customer Name. Not Billable. Now you get to use Quantity and the same Items as on the Estimate for the project's scope or baseline Budget. Now you also get to run reports, such as you Budgeted $1,500 for flooring and 6 new Windows, but I see we just bought 8 windows and $3,000 in Flooring when I report on Estimates vs Actuals.

 

"so the expense shows up on the property balance sheet. As you notice though I only ACTUALLY spent $2250 on materials with the remaining $250 staying on the GC for future use; which may or may not be for 123 Main Street."

 

Which is why that is Wrong. You first convert Banking funds to Gift card. Then, you spend from the Card account. The same is true for ATM: that's Not an Expense. You drew money from Banking, so that is now Cash On Hand or Petty Cash Bank account, in QB. Then, you enter and manage the spending of the Cash, because that is Real Money you are managing.

 

"What I would like to do is order say $10,000 of Gift Cards and create a credit balance in QBD that future material invoices could be applied against"

 

That's why the Card is a Bank Type of account.

 

"there-by reflecting a more accurate representation of expenses at the class level."

 

And this is neither Expense, nor would you be using Class.

 

Here is expense/repairs: I manage my own Rental Properties. One broken window gets replaced = Repairs. I change All Windows to high-efficiency new windows = Improvement as New Fixed Asset.

 

You are "creating my own Product to sell later" = Other Current Asset. For the date it Sells, you also Clear Out WIP to COGS, for the project's total invested Costs. Now you have Profit for that date and that sale: Sales minus COGS.

 

Please see my attachment. And you should consult with your own CPA about this operation.

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Re: Creating a Credit Balance in QBD for future class-level expenses to be applied against.

Thanks qbteachment for the very detailed response. Not sure I follow your methodology. These homes are essentially "Goods" that I 99% of the time turn around a sell.  I've actually forwarded your response and document to my accountant and bookkeeper to get their opinions.. 

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