Adding Real Estate to Balance Sheet

mentalsweat

Hi all, longtime user first time caller. I currently am starting a hospitality business (motel) and I'm trying to update a balance sheet to include the value of the real estate and the liability of the loan and am having trouble creating the right accounts to accuately represent in the reports. Any suggestions on how best to handle? Thank you in advance!

Mikeg

@mentalsweat,
Under Accounting/Chart of Accounts you will need to add Building, Land, Furniture. Under Long term liabilities you can add the mortgage. You will also need to add an account under the Accumulated Depreciation section under assets.
A note of caution if you are in the US. You cannot post the fair market value of an asset as the cost for your business. A business receives an asset at the cost basis of the owner.

mentalsweat

Thanks Mike G for the reply. Do you mean "Property, Plant, Equipment"?

How do I add the cost basis to that account?

Mikeg

@mentalsweat,
Yes to the property plant and equipment.
As to cost, I can only provide an example..
Let's say I bought a building in my own name. I paid 200,000 and took out a mortgage for 150000. The building came with some appliances and furniture. All in all, maybe worth 5000. I've made some payments on my own and now have decided to open a business. The mortgage balance is now 145000. I look at the local property assessments and it says that land is 15k and improvements and building are 185k. Here is the entry:

Debit Land 15000
Debit Building 180000
Debit Furniture 5000
Credit Mortgage Payable 145000
Credit Owner Equity 55000

If you used the property in the past for business and took depreciation then the cost would be reduced by depreciation taken.