Accounting firms that provide specialized accounting practices to those within the real estate world understand the unique challenges and nuances associated with undertaking the business of real estate. Real state accounting requires not only an understanding of the nuances of the business, but also the current regulatory practices required of real estate accounting. These agents are experienced at offering goal-specific accounting, audit, tax and business advisory services to clients with real property or real estate sales and affiliated services.
Comprehensive Real Estate Accounting
What does comprehensive real estate accounting look like? Regardless of the environment or business format, there are some standard accounting practices that all businesses are required to follow. Organizations that offer a full range of accounting services will ensure their professional staff are on top of all the administrative, legal and other accounting requirements; they will be aware of any new deductions or reporting requirements; they will be able to answer questions regarding general book keeping practices, securing paperwork, organizing and filing necessary tax and audit as well as business documents.
In addition to general accounting practices, comprehensive real estate accounting will focus on the accounting requirements, but they may also work with new businesses to put into place the business documents, business plans, financial statements, tax structures, risk management plans, etc. Professional real estate accounting advisors will have the knowledge and experience to work with professionals within the real estate environment. They may advise on a full range of issues, from cost-cutting strategies and tax credit opportunities, managing risk and working with clients, to growing their businesses. Another potential bonus of comprehensive real estate accounting is the relationship-building potential; utilizing current professional real estate networks, banking and financial institutions, etc.
What are acceptable real estate accounting practices?
U.S. generally accepted accounting principles, also known as GAAP, is a common accounting method–but it is not the only choice for real estate companies that issue financial statements. The two common approaches for Real estate accounting are the GAAP and the income tax basis for financial reporting. A good accounting team will work with you to determine what the best approach is, what the benefits and challenges are of each, and the implications of both, etc. The income tax basis of accounting often produces reported financial results that are more closely aligned with certain economics of the business–particularly the cash flows associated with leases. This may not be as effective for other aspects of real estate accounting. There are some specific limitations to the types of reporting. For example, GAAP reporting would be required if the real estate entity is a public company–the governing bodies dictate in this situation. However, where there is no entity dictating the accounting method, it would be beneficial for a real estate owner to look at how both methods would impact the real estate accounting procedures.
While many small businesses, entrepreneurs, and individual contractors, may be more inclined to save the cost of working with a professional accounting service, as noted above, the nuances of the regulations and potential methods or real estate accounting practices may lead to the need to seek qualified, professional attention for your real estate accounting needs.
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