Treatment of Acquisition Costs

MarkC215

Hi,

I am having a little confusion on setting up the initial accounting for a recent property purchase.

How should funds that were used to acquire a property be treated? Should they be classified as equity? I am trying to make sure that they tie into my balance sheet correctly.

Thank you!

Mikeg

@MarkC215,
It all depends where the funds came from. Usually when rental property is acquired with owner contribution and debt, you create a journal entry to post the closing statement. Funds to close either came from the business account (part of the credit in posting the purchase) or from the owner as a contribution (a credit from owner equity/contribution)

MarkC215

Thanks for replying @Mikeg. I guess I am having trouble understanding how to treat the downloaded transactions from my bank account. These transactions show my deposits and subsequent withdrawals for inspections, earnest money and closing. Wave wants to automatically classify my funding deposits as income and my withdrawals for closing as expenses but that isn't accurate. I have a sort of catch all account for Acquisition Costs that I was using to show all of this activity but I am not sure how to classify that account. The net of all the deposits and withdrawals leaves some cash in the account and that is showing up as equity on my balance sheet right now.