Fused with categorizes or Chart of Accounts

6 Replies

I'm trying to set up my expenses in QB and Expenify and I've been back and fourth on a couple of categories. So far I have 1099, Advertising & Marketing, bank charges & Fees, Capital Expenses (for remodels) Car & Truck, Contractor, depreciation, donations, Employee benefits, insurance, interest paid, inventory assets, job supplies, legal &professional services, loans/points, meals & entertainment, office expenses, Rent & lease, repairs & maintenance, salaries & wages, taxes & licenses travel, utilities. I'm confused about Capital Expenses, my CPA says to just put into Maintenance but when I search online I hear you should keep it in it's own area. Another question I have, is there anything missing or I could add/take away. We are a property management company that manages it's own properties, thank you.

@Matthew W.

Any payments coming into you for services should be considered revenue.

Any payments going out should be considered expenses.

It depends if your books are for internal purposes or if its for tax purposes.
If its for tax purposes - Payments for properties should be classified as an asset. You would then be required to calculate the depreciation expense.
Depending on if the cost is for a repair or an improvement will determine if its currently expensed or capitalized.(you would also have to factor in the de minimis exception)

Your chart of accounts can evolve over time as QBs let’s you add accounts on the fly. 

Capital items aren’t really expenses; they’re assets that would be depreciated. 

So when doing upgraded or remodeling where would that go? I was told it was a capital expenses. I would have to put it in a maintenance catorgory.

@Matthew W. Any upgrading or remodeling would need to be capitalized and depreciated unless it's small enough to fall under the de minimis safe harbor rules but you'd need to talk to your CPA about that election.

Generally a large part of remodeling costs would be considered tangible personal property that could be depreciated over 5, 7 or 15 years as opposed to the long life depreciation schedule of 27.5 years for residential rental property or 39 years for commercial property. 

If you have several rental properties (it sounds like you do) it would probably make sense to do cost segregation to take full advantage of accelerated depreciation and bonus depreciation. Of course it all depends on the specifics of the properties. Feel free to PM me and I can give you all the details and work up some numbers for you. You've probably overlooked tens of thousands in tax benefits by not doing this.

What amount is considered small enough? Say $1500 for new tile in the living room or $700 for new plumbing. Is there general rule for when I should be putting those expenses in a different category?

Would repairs and maintenance also go into separate categories?


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