Quickbooks Chart of Accounts and Item List

19 Replies

A standard chert of account should get you started. Add new accounts as needed. It is important to put good detailed info in the memo line so that your accountant or book keeper can rearrange things as appropriate. The cost of rehabbing a house generally would go into an asset account for that property.

if you buy products  for resale, then the interview process will create the PO and Inventory items for you.  As a flipper, the COST OF GOODS sold may be a tool to track your costs.  The problem for flipping is the non-standard SIC codes for this activity

[sic:- standard industry codes per IRS]

see  http://siccode.com/en/siccode/list/directory

Hi Diana,

Not sure if you've read all the posts above. But if you're flipping here's some of the common general ledger accounts you will need.

Revenue:

Rental Income (in case your rent it before you flip)

Sale Income (sales price when you sell it)

Expenses:

RET (Real Estate tax expense)

Insurance Expense

HOA Expense (if applicable)

Interest Expense (if applicable)

Depreciation expense (if carried over multiple years)

Assets 

Fixed Asset - Building/home/condo (whatever you purchase), this should include all the costs associated with the purchase

For your rehab, anything that essentially increase the value of the property should also be capitalized as a separate fixed asset (i.e. new stainless steel refrigerator, tile, new vanity etc) Inform your CPA as each will have different depreciable lives per MACRS, and this will be important if you carry for your flip over two different tax years. All the labor associated to these types of assets can also be capitalized.

Cash - Assuming you have put some cash into a back account separately to fund your business

Liabilities-

Debt/ mortgage you may have taken on to purchase the asset

Anything your purchase that essentially does not increase the value of your home can be expensed in the year in which it was paid. You can carry your loss (NOL) from year to year but I know a limit does exist so be sure to check with your tax preparer.

I highly recommend that if you are getting into flips (and you are doing more than just one every here and there) and want your taxes to be correct, I recommend sitting down with your accountant. Better to be right the first time and for the IRS to probe you. Not saying that will happen, but its easier to be right on the front end.

Also, if you're flipping frequently, I highly recommend discussing the rules of a 1031 exchange and this can be a great tool to deferring taxes on gains associated to real estate.

While I do go on record that I am a CPA, I do not specialize in real estate tax transactions as my background is audit (not tax), it's important you speak with a real estate tax accountant to ensure your best interest are met.

I hope this was helpful, there are plenty more GL accounts to include and PM me if you have more questions. I am happy to share my quickbooks chart of accounts with you (mind you my purchases have only been buy and hold but most accounts should work for both types of REI).

kind regards,

Phil Bottfeld

J Beard If IRS will accept NAICS, it is 236118, if SIC, there is nothing really for non-GC items but 1521 & 1522 is normally used even for non-GC.
@Diana Gay Buy J Scott's book about flipping, it has a ready made chart of accounts.

Originally posted by @Phil Bottfeld :
@Diana Morselli

Also, if you're flipping frequently, I highly recommend discussing the rules of a 1031 exchange and this can be a great tool to deferring taxes on gains associated to real estate.

I wanted to clarify this comment.  Properties acquired with the intent to buy, rehab/flip and then sell do not qualify for 1031 Exchange treatment.  You must have the intent to hold the property for rental/investment in order to qualify for 1031 Exchange treatment.  Properties acquired to rehab/flip are held for sale and not held for investment purposes.

Bill is correct. It should be known that you also need to identify a property within a specified period of time. I believe it's 90 days from date of close on the old property. It also requires for you to close on a property (not necessarily the property that was identified 90 days subsequent to the close of the old property) with a 180 days. I recommend speaking with someone who is experienced with this type of work.

Thank you Bill for your input. As a QE I will leave this subject to your expertise.

Regards,

Phil

Originally posted by @Phil Bottfeld :

Bill is correct. It should be known that you also need to identify a property within a specified period of time. I believe it's 90 days from date of close on the old property. It also requires for you to close on a property (not necessarily the property that was identified 90 days subsequent to the close of the old property) with a 180 days. I recommend speaking with someone who is experienced with this type of work.

Thank you Bill for your input. As a QE I will leave this subject to your expertise.

Regards,

Phil

You have 45 days to identify after closing of your sale.  The 180 days to close is mostly right, but has a few potential catches.

Mark

thanks mark. Just saw that. I think this makes a good point for all investors who are taking anyone's advise to verify any and all information posted here thank you mark.

Phil

@ J Beard or anyone else who can answer : What is the purpose of the NAICS and SIC codes?  I have the Contractor Edition of QuickBooks and noticed these codes in the Items List.  Do I need to keep these codes for Tax purposes?  Can I alter my items list and create new codes?

@Diana Gay You do not need the code if you do not want. You should track your income, expense, asset and liability and file your tax return to the best of your knowledge. And when they come knocking on the door you better have proof for each and every penny. 

Codes (items and subitems) are created to organize your accounts and items. Does one need it? No. You customize it the way you are used to.

QuickBooks, excel is a tool to track details and our clients use it as a management tool as well accounting. 

Someone asked for a list - why not you start your own? Start with where you spend your money and why? The why will be your own list. Not everyone keeps track of all details like nails, screws, plywood... So own you own list. 

Profit & Loss should be around one to two pages.

Item list can be 14500 in QuickBooks Pro and 100,000 in QuickBooks Enterprise and unlimited (I hope) on QuickBooks Online. Unlimited always comes in tiny print (always has a limit). LOL!