Allocating expenses to increase the value of an asset- real property?
Bookkeeper1
Member Posts: 6
Hello, My business has a piece of real property as an asset that is being developed- there are expenses such as building material costs, permits & Govt fees & such that need to go to increasing the basis value of the asset, how do I enter this in Wave so that it comes out on the Balance sheet & P&L correctly??
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@Bookkeeper1,
You would categorize the withdrawals from the cash account as the type of fixed asset it relates to. So for example if you had to raze the land, the cost would be coded to land or if you had to put in sidewalks that would go under land improvements etc etc
Thanks Mike G- can you give me a specific example of how the in/out transaction would look in Wave transactions for say... an expense for Building permits - in Wave I entered as expense from business checking (to reconcile to that statement) then how would the rest of the entry look to make is add to value of asset on the balance sheet?
let me ask in a different way just to see if I am thinking about this correctly already... for company
real property = investment for resale later: cost of property = initial investment $$= asset account
project $$ for improvements> deposit to checking = account owner's contributions,
supplies for improvements> debit from checking = Asset value increase... then do the expenses also reduce the Equity from owner contributions or should they increase it?
@Bookkeeper1,
Cost associated with construction are usually capitalized into the cost of the property that is an asset. So if you pulled a permit for constructing a new building, that would not be an expense but a capitalized cost of the building. There are a host of expenses that go into real property. How they paid for is how they likely get posted by the business. So if the owner is paying then it would be a credit to owners equity and debit to the asset. If the business is paying for then it gets categorized from the checking account.
Thank you, yes I get that part... what I need is how to enter in Wave so that it comes out on the Balance sheet correctly for the 2nd option you mention- company is paying...
Thanks a bunch!
@Bookkeeper1,
You need to be sure you have an asset set up. Whatever it is that best describes what your building. Go to Accounting/Transactions. From there it is like a check register. The deposits and withdrawals should be categorized accordingly. Use the drop down next to each transaction and code to the asset for those that should be capitalized.
@Mikeg Thanks so much!