Real Estate Accounting in Quickbooks
Landlords need to master some accounting. Here are a few details from smartsoft regarding accounting:
If you are a nonfinancial manager, the best way for you to understand your company's financial statements, and particularly the balance sheet, is to follow the wisdom of an old saying: "How do you eat an elephant? One bite at a time." To become more familiar with your company's financial statements, you can start by learning about the asset section of the balance sheet.
Assets are things a company owns. The three categories of assets itemized on a balance sheet include current assets, other assets, and fixed assets. Details about these three categories of assets are provided below.
1. Current assets
Current assets include cash, accounts receivable, inventory, and prepaid expenses. They are "current" because they are expected to be used within a year. These assets reflect a dynamic cycle of cash used and cash expected.
It's important to keep in mind that cash isn't necessarily self-evident, like the money your company has in the bank. It also includes money market accounts and short-term treasury bills, also called T-bills.
You can think about accounts receivable like a credit card. When you have a credit card, you have a period of time to pay off your debt. Your company probably provides the same services to its clients—you ship goods on credit. The credit will convert to cash as soon as you receive payment. This is usually within 30 to 60 days. So whether clients have paid or not, accounts receivable are considered an asset. In addition, all three types of inventory—raw material, work in progress, and finished goods—are counted as assets, since all of these can be sold as cash.
Prepaid expenses are goods or services the company has paid for but not yet received. These include such things as prepaid insurance premiums and deposits for rent. These, like cash, accounts receivable, and inventory, are part of current assets.
2. Other assets
Other assets include intangible resources such as the value of patents, copyrights, trade names, and goodwill. They can also include items such as deposits on three-year loans or things that don't fit in the current or fixed asset categories. Other assets can be valuable to an organization but tend to be more intangible.
Goodwill is hard to quantify but is an asset nonetheless. For example, a company's very name can be considered goodwill if it has established a reputation that increases the company's worth.
3. Fixed assets (I talk about these in Landlord Accounting (use Quickbooks with Real Estate Investing))
Fixed assets include tangible things used for ongoing operations, such as land, buildings, vehicles, and machinery. They are used for the ongoing operation of the business. To reach a figure for net fixed assets, start with the cost of equipment and deduct accumulated depreciation. Net fixed assets reflect the purchase price minus accumulated wear and tear.
If you have ever purchased a new car, you already know about depreciation. The second you drive off a lot, the car's value is reduced. This means its price is now less than what you paid. However, your car is still worth something.
Remember, the three categories of assets included on a financial statement are current assets, other assets, and fixed assets. Once you break the financial statement's asset section down into bite-sized pieces, you'll find it much easier to understand the assets section of your company's financial statement.
whew, that's alot for now.
Real Estate Accounting I use quickbooks for this. I'm also a big fan of
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