Posted by Ken Holmes on August 12, 2008 at 07:40:52:
In Reply to: Re: Question re. Business Income Statements posted by IB (NJ) on August 12, 2008 at 07:26:07:
OK, lets see if I can explain how I do it.
I have an asset class called "Inventory". Under this, I list each house as a subasset. So, no, a house would not show up on a P&L. It will show on a Balance Sheet. There would be an asset on the balance sheet called 123 Elm with a balance of 103,000. There typically will be an offsetting note payable (a liability acct) for say 100,000. Your "equity" doesn't show up. You could do it that way, where the equity did show by listing the asset at perceived market value, but I do not do this as it greatly complicates things IMO. So, bottom line my houses do not affect the P&L until sold (again, not counting the end of the year expensing of interest, utilities and insurance, if you choose to expense them at that time).
Think of it this way - each time you spend money on a house such as $5000 for a new roof, this is not an expense. The new roof is the continuation of your purchase of this asset.
My way is certainly not the only way, others may have a superior system. But it works for me.
- Re: Question re. Business Income Statements IB (NJ) 08:08:58 08/12/08 (0)