Real Estate Accounting Record Keeping Procedures Are Regulated By
Real estate accounting is a crucial aspect of managing a real estate business. Proper accounting record keeping procedures are necessary for the successful operation of a real estate business. These procedures help ensure compliance with regulations and laws, and they provide a clear picture of the financial health of the business. In this article, we will discuss the regulations that govern real estate accounting record keeping procedures.
The IRS
The Internal Revenue Service (IRS) is responsible for regulating real estate accounting record keeping procedures. The IRS requires businesses to maintain accurate and complete records of all financial transactions. These records must be kept for at least three years.
The IRS regulations also require businesses to keep track of their income and expenses separately. This means that real estate businesses must keep separate records for each property they own or manage. They must also keep track of any expenses related to the properties, such as maintenance costs, repairs, and improvements.
State and Local Regulations
In addition to the IRS regulations, real estate businesses must comply with state and local regulations. These regulations vary from state to state and city to city, so it is important to research the specific regulations in your area.
State and local regulations may require businesses to maintain additional records or file specific reports. For example, some states require real estate businesses to maintain records of tenant security deposits and to provide tenants with an itemized list of deductions when they move out.
Generally Accepted Accounting Principles (GAAP)
Real estate businesses must also comply with Generally Accepted Accounting Principles (GAAP). GAAP is a set of accounting standards that have been established by the Financial Accounting Standards Board (FASB).
GAAP requires businesses to follow specific accounting principles and guidelines when preparing financial statements. These guidelines ensure that financial statements are accurate, complete, and presented in a consistent manner.
Record Keeping Procedures
In order to comply with the various regulations governing real estate accounting record keeping, businesses must establish proper record keeping procedures. These procedures should include:
- Keeping accurate and complete records of all financial transactions
- Maintaining separate records for each property
- Keeping track of income and expenses separately
- Complying with state and local regulations
- Following GAAP accounting principles
- Regularly reviewing and reconciling accounts
The Importance of Proper Record Keeping
Proper record keeping is essential for the success of any real estate business. It ensures compliance with regulations and laws and provides a clear picture of the financial health of the business.
Accurate and complete records also make it easier to prepare financial statements and tax returns. They can help identify areas where the business is spending too much money and areas where it could be saving money.
Conclusion
In conclusion, real estate accounting record keeping procedures are regulated by the IRS, state and local regulations, and GAAP. To comply with these regulations, businesses must establish proper record keeping procedures that include keeping accurate and complete records, maintaining separate records for each property, and following GAAP accounting principles. Proper record keeping is essential for the success of any real estate business.