If your tenants haven’t paid the rent which you have already invoiced them for, then the rent would be recorded as rent receivable (rent to be received). Doing so will also help you manage your cashflow and control your tenant’s accounts. You can also overview the payments that tenants still have to pay to your business or company. You can also track the tenants who haven’t paid cash against due rent. Moreover, you can assess the duration for which the tenant’s rent was outstanding by looking at the tenant’s accounts.
If the rent is paid on the due date in cash then it should be posted as a cash transaction. Thus, you can record your income on time and analyze the profit and loss statement. Moreover, recording the cash received against rent and tallying it with the cash in hand regularly can make your record keeping more accurate. In fact, this will be more accurate than having to calculate the money you made throughout the year in just one go.
This option is to be used when rent is not received in cash. Once you receive payment from the tenant, then the account receivable (money to be received) is decreased and an entry in the bank or cash is posted. This way, you can track tenants that need to pay rent so that you can follow up with them.
Posting all property-related expenses and comparing it with the rental income will give you an idea of how much profit you have earned. It can help you make your budgets too. Once you know how much you have spent and the amount you’ve saved, you can control your spending, make your budget, and manage the available cash the way you want to.
Accounts payable refers to expenses you have to pay in the near future such as rent which is overdue. It is an important process because it involves payment to third parties. By properly recording outstanding payments under account payable, you can pay your vendors on time. Otherwise, it might hurt your credibility and you may have to pay a fine or penalty.
When you pay your expense in cash at the due date then its invoice should be posted as a cash transaction. Similarly, this option is also helpful if you use cash receipts for small expenses. Recording all your cash expenses in time will help you assess your financial position at any given period. It will also help you prepare your budget and future cash requirements.
When you make any purchases but haven’t made payment against them, then you should post an accrual transaction which is basically the amount you owe. When you pay the amount you owe, the bill, the accounts payable will be cleared by the amount, therefore your bank will be reduced by this payment.
Rent late fee is generally charged when your tenants do not pay you the rent within the due date. The rate of late fees or penalty conditions are mentioned in the rental agreement. Once the deadline for rent due has passed, you should post an entry of rent late fee plus the rent due as an account receivable (amount owed to you). Charging late fee on rent due shall make your tenants accountable. Plus, posting it to accounts receivable shall provide you with a complete record of any amount due against penalties or late payments.
Once you post rent late fee in accounts receivable and after some time, you receive it from your tenants; you should decrease the account receivable entry and post it to the bank account. If you don’t decrease the accounts receivable entry, your accounts receivable balance will be overstated. Moreover, if you don’t post it to the bank, your accounts will not match with your bank statements.
A liability is an obligation towards other people which should be settled in a defined period of time. Since refundable deposits received from tenants need to be paid back after a specified period, you should record them as a liability to you. Posting these deposits as your asset or income will overstate your assets and understate your liabilities.
When the deposit period mentioned in the rental agreement or its associated documents is over, you should pay back those deposits to your tenants. These deposits should originally be posted as a liability and should be reversed back when you hand them back to the tenants.
Mortgage interest is charged by the bank on loan against mortgaged properties. The banks generally charge this interest at the end of the financial year. If, at the end of the year, the bank has charged you its mortgage interest, post it as an expense (amount) that will be deducted from your bank account.
Depreciation can be defined as the reduction in value of assets over time due to obsolescence, physical wear & tear, or damages. It is an accounting method where the value of each asset is reduced over the period of its useful life. Posting year-end expense as depreciation shall give you the accurate value of your assets and will help you correctly report your assets in your financial statements.
Property taxes are something that you should record as one of the major housing expenses. These are something that you cannot avoid, otherwise, the government would charge you fines or penalties. Knowing your tax liability beforehand is really important. You should assess your property taxes due at the end of the year and record them as an expense. If the taxes due are not paid at the end of the year, you should record them as accounts payable (money you owe).
Owner contribution in cash within the company is included in the capital of that company. Whenever the owner makes any contribution to his/her organization in cash, this should increase your company’s bank balance.
The purpose of adjusting bank balance as an adjustment to income is to ensure that all the revenue received in the bank is recorded in your accounts. To match bank account balance with income, you should check all the credit entries appearing in your bank statements and identify its source. Then match these credit entries with the income recorded in your accounts.
Matching all the debit transactions appearing in your bank statements with your recorded expenses will give you surety regarding the completeness of your expenses. If there is any un-reconciled balance left in your expense reports at month or year-end, you should adjust this balance with your bank balance and vice versa.