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Robert M.
Robert M., Consultant
Category: Financial Software
Satisfied Customers: 8753
Experience:  30 yrs. of computer experience in financial and marketing departments.
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I'm a bookkeeper (Meredith Engle) with a new client

Customer Question

Customer: Hi ***** *****. I'm a bookkeeper (Meredith Engle) with a new client (Residential Property Management Company), setting them up in QB/Premier. I have set up similar to your suggestion (lucky me), but I don't think that the Property Management Company should record the rent received as Income, should be "Escrow Liability," similar to a Trust Account with Law Firm; when bills are paid from the "Trust Bank Account" which was set up for Landlord/Owner, checks are issued from that account, offsetting the Escrow Liability Account. Checks to Landlord/Owner also offset the Escrow Liability Account. I would think that "management fees" would be the income that my client, the Property Management Company records. I have set up the Landlord/Owner as both a Vendor (to track net rent payments for 1099 purposes), as well as a Customer, under which subs are created for Tenants. This is Residential, so we are not creating invoices to Tenants (sub-jobs to the parent/Customer/Owner); we are recording the rent received as a Deposit to the Trust Bank Account, and credit the Escrow/Liability Account. Management Fees are calculated as a percentage of "monies collected from Tenants," and I find this creates two entries in order to clear that amount from the Escrow/Liability, as well as record the Management Fee income when the Fee is paid (using a Cash Clearing account to offset the Receivable and Payable). Suggestions or comments about this methodology?
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Submitted: 11 months ago.
Category: Financial Software
Expert:  Robert M. replied 11 months ago.

It can be done either way.

putting the rents into escrow would be a better way technically as that is really what they are.

quickbooks is also used by a lot of landlords that own the buildings and for them the rent is income.

As long as you can deal with it this way it will work but to me not having an accounting background i avoid using ledger entries when i can use something like an invoice. It is a lot easier to track whether it was paid or not that way.

You might also look up consignment sales in quickbooks. That is pretty much the same situation and there has been a lot written about a few different ways to do it in quickbooks. At its most basic you can either pass though the actual sale from the buyer to the owner completely and then bill the owner for your commission

or you can buy it at x amount from the owner ( the price or rent minus your commission) and sell it for the full price

the first way is more complicated to put in but it saves you from having your business sales look a lot higher than they really are.

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