Accounting practices can be defined as financial activities of organizations or companies recorded on a daily basis. In case of real estate firm, real estate accounting practices involve the implementation of accounting policies concerned with a real estate firm involving the daily recording of financial data that is important for evaluating and monitoring of the concerned real estate firm’s economic activities. Accounting for real estate transactions mainly deals with 5 aspects, income, assets, liability, equity and expenses. All these five aspects are the basis of any accounting procedure.
Managing real estate properties requires real estate firms to follow the best real estate accounting practices for all real estate transactions such as retail land sale, real estate sales, property exchanges, sale of time-share intervals etc. Real estate accounting involves a high volume of transactions and costs. To get it done efficiently, real estate management companies must follow the best accounting practices. Let’s have look at the effective real estate accounting guide:
Best Accounting Practices – An Overview
Accounting for real estate transactions requires great in-depth knowledge of the ongoing accounting laws and rules. As such, utilizing the expertise of firms involved in property management services is the best option that can help the firm in structuring the financial operations in a way that ensures compliance with property management accounting basics.
The following best practices in terms of accounting for real estate would help real estate firms in achieving financial acumen and these include-
1. Maintaining reliable and timely financial records
Maintaining proper and complete accounts is the key to winning the investor’s trust. Highlighting the upcoming financial plans and keeping the records complete and transparent, help the firm stand out and increases goodwill.
Careful record keeping of the financial transactions related to real estate business allows the accountants to troubleshoot the potential problems and to respond quickly to the inquiries of managerial hierarchy such as-
2. Reconciliation of Bank Accounting Statements
Bank reconciliation is a necessary part of property management accounting. Bank reconciliation helps real estate firms in finding out duplicate entries, bank errors, missing entries, and other typical errors. Bank reconciliation helps real estate firms in avoiding lousy bookkeeping. And all this is done by the real estate accounting expert.
3. Separation of Trust Funds
It is important to keep company and personal funds separate from the trust account funds as money in these funds belongs to the client or in the case of security deposits to the tenants.
It is illegal in many states to coalesce funds as some states have laws that dictate more specifically, as to how funds should be handled. It is better to avoid depositing company’s operating funds into trust accounts that handle property owner funds or tenant security deposits.
4. Assistance in Filing regular and accurate returns
Taxation is a major part of accounting and the returns must be filed on a timely basis. The availability of good real estate accounting services is the best way to save oneself from all these tax filing deadlines. It also helps the firms focus on other core activities and get rest assured about the returns and accounting responsibilities.
All in all Real estate accounting practices involve several things like, time to time valuation of property, coping with the ongoing property rules and regulation, analyzing the fund requirement, assessing liability protection, etc. Commercial real estate accounting can be a game changer and can be used as a powerful tool to maximize profits.
Real estate accounting services are crucial when it comes to managing the accounts of real estate companies. The financial statements of the companies are important as they are the user manuals for the internal and external users and help them in decision-making.
By following the above-mentioned accounting practices – a real estate firm can keep its books clean that in turn would help them in reducing operating costs, administering payroll, managing employee benefits and enhancing its profitability in the long run. There are a lot of real estate accounting services available that help firms maintain and manage accounts. Choosing and availing of the best real estate accounting services require a bit of research and effort.
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