Split accounting for owner-occupied duplex

JRBv3 · ‎April 13, 2019

I own, live in, and rent out half of a duplex. What's the cleanest way to track this in QuickBooks considering I track the business only and don't use QuickBooks for me personal finances?

I only see two options:

Create the fixed asset and mortgage at half and then input everything halved as well. Nothing would match reality but it would correctly show the assets/liability amounts.

Input the asset and mortgage accurately and then input amounts split between draw and business accounts. Use a journal entry to offload half the asset and liability into draw somehow?

In short, should I forget about reality and just input the property as half in the first place and account for it that way or input the property as it really is and use some form of accounting entries such that the assets/liabilities/payments all report out properly or is there an even better option I haven't thought of?

I understand this is subjective and, I believe, one could do it either way, but not sure if there's any wisdom as to which provides a better outcome before I go to far down the road either way.

Rustler · ‎April 13, 2019

You can do it either way, my preference

enter the fixed assets
1234 some street, apt B
>> land
>> buidling cost
>> >> building accumulated depreciation

land is not depreciated

enter the mortgage as a journal entry
debit land, $$$ (half the land value)
debit building cost, $$$$ (half the building value)
debit owner equity draw, $$$$ (personal half land and building)
credit mortgage liability, $$$$$

If you made a down payment it is split the same way
debit land
debit building
debit equity draw
credit bank

When you make a mortgage payment split the payment
interest expense, $$$ (half the interest paid)
equity draw, $$$ (half the interest paid)
mortgage payable, $$ (remaining amount of the payment)

View solution in original post

Rustler · ‎April 14, 2019

:-)

View solution in original post

Rustler · ‎April 13, 2019

You can do it either way, my preference

enter the fixed assets
1234 some street, apt B
>> land
>> buidling cost
>> >> building accumulated depreciation

land is not depreciated

enter the mortgage as a journal entry
debit land, $$$ (half the land value)
debit building cost, $$$$ (half the building value)
debit owner equity draw, $$$$ (personal half land and building)
credit mortgage liability, $$$$$

If you made a down payment it is split the same way
debit land
debit building
debit equity draw
credit bank

When you make a mortgage payment split the payment
interest expense, $$$ (half the interest paid)
equity draw, $$$ (half the interest paid)
mortgage payable, $$ (remaining amount of the payment)

JRBv3 · ‎April 13, 2019

OK, Entering the mortgage portion makes perfect sense to me. I had the entire HUD as a single Journal Entry so I changed it to create the splits. I'm confused on the down payment entry, though. I had a single credit against my checking account for the down payment. If I create a new line with an offsetting debit to equity draw I'm unbalanced.

The down payment debits for land and building would total as the entire down payment. If I add another debit for equity draw, what is that amount? It looks like I'm creating an unbalanced entry with the extra debit for equity draw.

If the down payment is 100k and we're split 75/25 building I would create:

25k debit for land

75k debit for building

100k debit for draw

200k credit for bank??

I think I'm missing something.

JRBv3 · ‎April 13, 2019

Got it, I think. Building is 50/50. So, same scenario, 100k down split 75/25 37.5% building 37.5% draw 12.5% land 12.5% draw credit bank for the whole 100K It balances out. I had to noodle on that for a while before I got it. I've never accounted for anything before in my life so I'm slow on the uptake over here.

Rustler · ‎April 14, 2019

:-)

B3 Properties · ‎June 01, 2020

Hi there, my wife and I just bought a duplex and live in half of it. I was excited to see your question because I had the same one. Would you mind sharing your chart of accounts? I'm trying to figure out the correct way to setup chart and record our liability side of the mortgage and improvement costs to our unit.

I would appreciate any guidance.

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Split accounting for owner-occupied duplex