How do I account for a real estate down payment bill considering that the same bill will also show up on the settlement statement at time of close?

user12 · ‎April 04, 2022

When I buy real property for my business I usually make a down payment up front and then close on the property at a later date. To do this I create a bill for the down payment and then pay that bill from my business bank account. Then, once the property closes I get a settlement statement which I enter into QBO as a new JE. The problem is the down payment is included as a line item on the settlement statement. How do I tell QBO this line item is the same as the bill I already paid?

Rainflurry · ‎April 05, 2022

@user12

There's no need to enter a bill when you make the earnest money payment on real property - just write a check and assign it to accounts payable. This will keep the earnest money as a credit to be applied when you close.

From an accounting perspective, the earnest money payment is technically an asset but, in QB, in order for it to show as a credit, you need to assign it to A/P.

If you use J/Es for the earnest money, you can debit an 'Earnest Money' other current asset account and credit the bank account. Then, when you enter the closing statement, you will credit the earnest money account and you should be good to go.

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Rainflurry · ‎April 05, 2022

@user12

There's no need to enter a bill when you make the earnest money payment on real property - just write a check and assign it to accounts payable. This will keep the earnest money as a credit to be applied when you close.

From an accounting perspective, the earnest money payment is technically an asset but, in QB, in order for it to show as a credit, you need to assign it to A/P.

If you use J/Es for the earnest money, you can debit an 'Earnest Money' other current asset account and credit the bank account. Then, when you enter the closing statement, you will credit the earnest money account and you should be good to go.

user12 · ‎April 05, 2022

Thank you!! Your solution can also be used with bills. Just need to set the bill category to the asset account.

Rainflurry · ‎April 05, 2022

@user12

Yes, good point. Obviously, you still need to journal entry the credit out of the asset account when entering the closing statement. Generally, I assume most QB users will use bills for both transactions or neither.

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How do I account for a real estate down payment bill considering that the same bill will also show up on the settlement statement at time of close?