cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 2

How to record pass-through income

Our property owners association has used an outside management company up until now.  We are in the process of taking over management of our own accounting and have received funds from the management company to deposit in our bank account.  How do I record this in QuickBooks so that it does not look like new income?  The bank account to which it is being deposited already exists with funds in it prior to this deposit.  When I create the account in the Chart of Accounts, what Type should I choose? Other Current Asset?

3 Comments
Highlighted
Community Champion

How to record pass-through income

Hello @FMPOA:

 

This was income earned last year?  I am a bit unclear on your question.  Did they owe this to you for past collections?  You still have to record the sale.  The proper way would have been to put it in a prepaid account when it was received and then when earned, put it in income.  Here is a post on Prepaid rent I posted last weekend. 

 

 

 

The video demonstrates the flow on QuickBooks Online (my fav!) however, it is still applicable for QuickBooks Desktop.  

 

Feel free to provide more information if I am not quite understanding your question.  :smileyhappy:

Lynda

Highlighted
Level 2

How to record pass-through income

Lynda,

Thanks for the response.  Let me try to explain the situation a bit better.  Up until now, our Property Owners Association (POA) has retained the services of a management company for all of our accounting.  The management company maintained a bank account on behalf of the POA, collected our annual assessments, paid invoices, etc.  We are severing ties with them and opting to do all of the accounting ourselves now.  So the check that the management company has sent us is not for sales or new income.  It is the remaining balance of our money that the owners have paid in the past and that were being held in the bank that the management company used.  So it's already been accounted for in terms of taxes and such.  They've sent it to us to deposit in our own bank account so that we can manage the funds going forward.  What I'm trying to figure out is how to record that deposit so that it does not get counted as new income twice.  The bank account to which it was deposited is not a new account, so it's not really an opening balance (at least, not intuitively to me!)

Apologies if my verbiage is imprecise -- I am by no means an accountant!

Thanks for any assistance.

Highlighted
Community Champion

How to record pass-through income

How have you or your accountant been showing the income and expenses in your books in the past?  One annual entry just showing income at the end of the year?  Or maybe two entries, one for income and one for expenses?

 

But basically the Management Co. has been "holding" your money to pay day-to-day expenses and then at some point you either get a deposit you show as Income or you have to give them money to show as an Expense at the end of the year for taxes.

 

So the easiest way, which is the way I've done it for years, is to create an account with the Mgmt Co's name on it.  Assuming you were at a $0 balance with the Mgmt Co as of Jan 01,2018 start with $0 in the account.  (If not, you'll probably need an Adjusting entry to get the opening balance correct, again, you'll need to check with your Accountant at some point before Tax crunch time.)

 

Pull out the statements you get from the Mgmt Co and (your choice) for each month either enter one entry for income each month and the minimum entries you can do for each type expense (e.g. one entry for power, water, sewer, etc. into Utilities; one entry for all repairs into Repairs or whatever you call it; others for Insurance, etc.).  OR, feel free to enter each expense individually if you want to full record of the expenses.  NOTE: If you're taking over the management, you're going to start entering in individual income from each apartment as you get it and each expenses as you pay them, so now might be a good time to make sure you have all the vendors and categories set up.

 

And finally, the amount left in that account should match the check you were just sent.  So it should be a simple transfer from that Mgmt Co account to your checking account.  Then just make the Mgmt Co account inactive.

 

Only thing left to do is to just make sure everything balances and the accountant is happy with the entries before it becomes tax time.

 

Good luck.

Need to get in touch?

Contact us