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Level 2

Journal Entries and Property Management Statemens

Hi there- I have a question and I will do my best to describe the situation, because it's confusing to me.   

 

I have a client that owns apartments, they have a management company that provides a monthly statement.  I have been entering the monthly statements by Journal Entry to track Net Rental Income less Expenses.  Some months include contributions made by the owners which I classified as Partner Contributions (Equity).  I entered an entire year of statements before entering the bank statements.

 

So...now that I am entering the bank statements, I have deposits made by the owners that I need to track. These amounts differ from the Property Management statements because there are expenses paid directly out of the operating account.  My question is how do I classify these deposits?  Do I need to change my JE entries from Partner Contributions?  

 

Any advice would be so appreciated!  I am stumped.  Thanks so much.

Solved
Best answer May 26, 2020

Best Answers
Highlighted
Level 15

Journal Entries and Property Management Statemens

@Mary C 

 

Helps a lot, thank  you

 

Each owner should have their own set of equity accounts, what they invest is deposited in the bank and you use the partner/owner equity investment account as the source account for the deposit.  Payments by those partners/owners are made and equity drawing is used as the expense.

 

Which bank account the deposit is made to is immaterial.

 

For a company taxed as a sole proprietor (schedule C) or partnership (form 1065), I recommend you have the following for owner/partner equity accounts  (one set for each partner if a partnership)

[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

 

View solution in original post

5 Comments
Highlighted
Level 15

Journal Entries and Property Management Statemens

Owners are contributing along with rental payments? Are these owners in the respect that they are buying the apartment or are they actual partners in the business?

You say you have owners depositing money, and at the same time say these are expenses paid out of an operating account. confusing.

Your journal entry should track gross rental income less expenses, is that what you meant to say?

Highlighted
Level 11

Journal Entries and Property Management Statemens

@Mary C 

"I entered an entire year of statements before entering the bank statements."

 

That's what the issue is. I would first reconcile those two up-front, and enter transactions at the same time. And the difference between the Property Management Statement and the bank statement should be brought up with the Owner. It's possible to true-up difference may end-up using the Equity account.

I hope this helps!

Highlighted
Level 2

Journal Entries and Property Management Statemens

Hi Rustler - Thank you for your response.  The "owners" are buying the property and also partners in the business (married couple).   The property management company collects the rents and then pays and tracks most of the monthly expenses.  There were some capital investments for renovations so the owners were contributing funds directly to the PM to cover the construction work.  

 

In a separate bank account, the owners also contribute money and pay the mortgage and other expenses that the PM does not manage.  

 

Does that make better sense?  Thanks again.

Mary

Highlighted
Level 15

Journal Entries and Property Management Statemens

@Mary C 

 

Helps a lot, thank  you

 

Each owner should have their own set of equity accounts, what they invest is deposited in the bank and you use the partner/owner equity investment account as the source account for the deposit.  Payments by those partners/owners are made and equity drawing is used as the expense.

 

Which bank account the deposit is made to is immaterial.

 

For a company taxed as a sole proprietor (schedule C) or partnership (form 1065), I recommend you have the following for owner/partner equity accounts  (one set for each partner if a partnership)

[name] Equity (do not post to this account it is a summing account)
>> Equity
>> Equity Drawing - you record value you take from the business here
>> Equity Investment - record value you put into the business here

 

View solution in original post

Highlighted
Level 2

Journal Entries and Property Management Statemens

Got it!!  Thank you so much!  

 

Mary

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