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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
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Experience:  US Taxation specialist.
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The accounting books for an apartment complex were set up incorrectly. How

Resolved Question:

The accounting books for an apartment complex were set up incorrectly.
How should "Concessions" be classified?
Submitted: 11 months ago.
Category: Tax
Expert:  USTaxAdvising replied 11 months ago.

USTaxAdvising :

Hello, Thank you for using justanswer. I can assist you with your questions today.

USTaxAdvising :

It really depends whether the apartment complex is on the cash or accrual method of accounting. If on the cash method then there would be no recording of the concessions (rent reductions). The cash received would be rent.

USTaxAdvising :

My understanding is that the retail rent is reduced by the concession (which could be all up front at the beginning of a lease or spread over the life of the lease).

USTaxAdvising :

Basically the rent is reduced by the concession. The entry to record the rental income would be to DR CASH 900, DR Concession 100 (Revenue account) - CR Rental Income 1,000.

USTaxAdvising :

Basically the concession reduces the cash received and total revenue without affecting the rental income charged.

USTaxAdvising :

It could also be recorded as an asset if spread over the life of the lease. in that case the DR to Concession would be to an asset account. Once the lease is closed or the concession terminated the concession asset would be closed to the income statement via DR to Rental income, CR Concession (asset)

USTaxAdvising :

I hope this answers your question. If not please let me know where I can provide further clarity.

USTaxAdvising :

Best regards,

Customer:

Should Accumulated Appreciation and Accumulated Depreciation show on my Balance Sheet?

Customer:

Cash Basis

USTaxAdvising :

Yes the accumulated appreciation and depreciation should be on the balance sheet. The entry to record depreciation/appreciation would be DR Depreciation expense (Income Statement), CR Accumulated depreciation (balance sheet). CR Unrealized gain/Appreciation(Income Statement), DR Asset (Balance Sheet)

USTaxAdvising :

Does this answer your questions?

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1080
Experience: US Taxation specialist.
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