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xenium
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DOUBLE-ENTRY ACCOUNTING FOR SHARED PROPERTY

I think I’m looking for the “experts-exchange.com” for accountancy, can anyone recommend one? I need help in tidying up accounts on a private family property project, and am looking for an accountant to check the steps as I walk through them. Below is an outline of the first steps which I am looking for advice to confirm or correct:

The currency is GBP but happy to talk in dollar for illustration purposes.

Step 1: Opening balance: Family property worth 100k, owned jointly by John, Anna, and Alex, split 40:30:30

Debit 100k: Property asset account
Credit 40k: John's equity account
Credit 30k: Anna's equity account
Credit 30k: Alex's equity account

Step 2: Alex invests 66k from his bank account to develop the property, and 118k worth of his time

Debit 66k: Capital expense account
Credit 66k: Alex's cash account

Debit 118k: Capital expense account
Credit 118k: Alex's "sweat equity" account ?

Step 3: The property is revalued at 300k, an increase of 200k on the initial value

Not sure what to do here initially, maybe

Debit 200k: property asset account
Credit 200k: capital expense account ?

That's it for now. I would envisage maybe upto a dozen similar-sized questions spread over a number of weeks, and in parallel I would study material eg from www.principlesofaccounting.com to understand the processes better. I would be willing to pay for professional support if anyone can recommend an online resource I would be very greatful.

Thanks!
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John

8/22/2022 - Mon
xenium

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PS copy of the above shared to google docs, inline comments welcome: https://docs.google.com/document/d/1mrCEIPmAcL7HmoMVyOGCjd0W7vCdYYJMlkukTkh_lK0
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Eirman

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xenium

ASKER
Eirman, thanks a lot for the links I will read through these.

hi John, thanks a lot for the feedback, which is very useful to avoid me going too far down the wrong path!

Re your point of a "Family Bank Account" this is virtual i assume, since there is no actual family bank account as yet (there maybe in the future) If so are the first transactions for my step 2 as follows?

Debit 66k: Family bank account
Credit 66k: Alex's equity account

Debit 66k: Property asset account
Credit 66k: Family bank account

Re the "sweat equity" i need some way to account for this as a debt, and in case i decide to write-off any of it i need a way to do this, can you suggest what the transaction should be?

Very grateful for your help. I am also happy to pay or contribute to a nominated charity based on time spent.

Thanks
John

Re your point of a "Family Bank Account" this is virtual i assume

You will find in Accounting that a joint entity needs a real bank account. Otherwise there is no way to track things. Reconciled bank accounts are key to a ledger of any kind.

Re the "sweat equity" i need some way to account for this as a debt

Alex has to invoice for the value, the ledger records an increase in Property and loan (debt) to Alex.

You can quickly see the need for a real ledger.
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James Murphy
xenium

ASKER
hi John, thanks again for your points.

I have a record of which bank transactions are concerning the "Family bank account" so presumably i can copy these to a statement to create the account virtually. There is no real account yet, and it is not practical to have one yet, so meanwhile I need a way to manage this.
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xenium

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Ok so is this just about terminology, if so then would this work:
Debit 66k: Dummy cash account
Credit 66k: Alex's equity account

Debit 66k: Property asset account
Credit 66k: Dummy cash account
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xenium

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Great thanks. I'm away from my desk just now but will come back to it hopefully tomorrow. Thanks again for your time and attention.
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xenium

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Re the "sweat equity" i need some way to account for this as a debt

Alex has to invoice for the value, the ledger records an increase in Property and loan (debt) to Alex.

Would this be valid:

Debit: 118k Property asset account
Credit: 118k Accounts payable (invoices from Alex)

Thanks again :-)
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xenium

ASKER
Many thanks again. Yes good point, though I would like to make provision for adjustments here. But as far as the example in this question goes, would the following complete the picture for step 3:

Debit 16k: Property asset account (this brings total to the 300k valuation)
Credit 16k: Family member equity accounts (john+anna+alex)

Presumably if there had been a loss (or overvaluing of Alex's time) then this could be adjusted in this step, debiting family equity account(s) and crediting property asset account?
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xenium

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Great thanks.

Is there any custom of holding a kind of provisional asset account for managing capital investments and then only transferring this to the property asset account once a formal valuation is completed, or if there is a sale. If so what would such a provisional account usually be called?

Thanks again. Hopefully that should be it for this question!
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xenium

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Great thanks, that makes sense, since also during construction the sale value may actually drop before it rises at completion. Not sure how this would be accounted for but i'm ok to ignore this effect for this case.
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John

Thanks again. Hopefully that should be it for this question!

There is lots to learn about accounting, but if this has helped, then we should probably wrap up.
xenium

ASKER
Many thanks for all your help, very useful thankyou.
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John

Thank you and I was very happy to help you.