Buying a property - how to log it?

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I'm a property developer. When I buy a property, how should I log it?

Capital assets seem to be restricted to items that depreciate over 7 years or less (i.e. equipment rather than bricks and mortar).

Thanks,

Mark
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Mark

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Posted 7 years ago

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Michelle Smith, Official Rep

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Hi Mark,

Thanks for getting in touch and hopefully I can help you with this today.

To enter the purchase of property what I would suggest you do, (you may want to check with your accountant that they are ok with this too), is to enter the property as Capital Assets with no depreciation. You would deal with the purchase in the following way:

When you explain the purchase payment in the bank account, initially enter the amount as a payments to another category such as Sundries, with the appropriate VAT percentage.

You will then have to journal the amount back out of this account and into the Capital Assets account.

Here is how to do journal entries: http://www.freeagent.com/support/kb/a...

And here are the entries you will need to post, dated the same day as the purchase of the asset, for the purchase cost of the asset excluding any VAT:

Debit 602-4 Other Capital assets Purchase with description property xx

Credit 280 Sundries with description property xx

This will clear the Sundries account and transfer the property into the Capital Assets account but with no depreciation.

I hope this helps and if you need any further assistance, please do not hesitate to contact FreeAgent again.

Kind Regards
Michelle
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Laura

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Following this as it would be an advantage to actually have a proper ay to deal with property as an appreciating asset. By doing this way with Journal entries how would we account for ongoing asset appreciation/depriciation in subsequent years? Would we need to update the value each year to reflect on our balance sheet or is it only on disposal of an asset?
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Anna Stanilevica

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Hi Laura,

Thank you for your message.

Yes, you will need to update the value at the end of the year if required. Your accountant would need to work out the appreciation or depreciation and enter journals for the revaluation at year end. 

So please run this past your accountant if you are unsure of the journals to post.

Hope this helps.

With thanks,
Anna
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Haycott Properties

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I have just found this thread, due to having the same problem. I am amazed that after 6 years since the initial query FreeAgent still cannot handle the purchase of property without having to use a long winded workaround. I realise you want to keep it simple so it is easier for business owners to use, but is this workaround really that simple for what must surely be a common circumstance? I am all for simplicity, but making it so simple that it can't cope with common real life scenarios is no good for anyone. 

I am now looking to other software that can do the job properly.
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Janice Atherton, Official Rep

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Hi David

Thanks for your feedback, and I do appreciate your comments.
For the majority of our user base the functionality available meets their needs. For some companies it's worth implementing a workaround in order to have access to the other important functionality FreeAgent offers such as Self Assessment, Payroll and VAT filing.

I've added your vote to this so that our product team are aware of the demand but in the meantime, I'm afraid the workaround remains as shown in the initial reply on this thread, copied here with a bit more information to help:
To enter the purchase of land or intangible assets that you don't wish to amortise, there is a way to enter these as Capital Assets with no depreciation. I would suggest you also check first with your accountant to make sure they are happy for you to do that.

If they are, then you would deal with the purchase in the following way:

When you explain the purchase payment in the bank account, initially enter the amount as a payments to another category such as Sundries, with the appropriate VAT percentage.

You will then need to post journal entries (https://support.freeagent.com/hc/en-us/articles/115001222304-Journal-Entries) to move the amount back out of this account and into the Capital Assets account.

Here are the entries you would need to post, dated the same day as the purchase of the asset, for the purchase cost of the asset excluding any VAT that you are reclaiming:

Debit 602-4 Other Capital Assets Purchase with description as you require (or, if the asset is not allowable for Annual Investment Allowance you should use 601-4 Other Capital Assets Brought Forward, to keep it out of the tax computation)

Credit 280 Sundries with description as you require

This will clear the Sundries account and transfer the asset into the Capital Assets account, but FreeAgent will not post any depreciation for it.

Here is more information about the Annual Investment Allowance, which most intangible assets and land are not allowable for: http://www.freeagent.com/glossary/annual-investment-allowance/?utm_source=Support&utm_medium=KB

I hope this helps.
Janice
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Paul Hill

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I agree with Haycott Properties, its about time FreeAgent could handle real world assets better such as properties and investments in managed funds.  My IT Limited company of 20 years has both and due to MTD I'm looking for a software package to use and it would appear that FreeAgent is too limited in its functionality to handle my company accounts.  It's a shame as on the whole it looks like a good package.
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Danosaurus

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As it has been a year, is there a better way now?  I'm needing to do a similar categorisation. 
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Kirsten Zammit, Employee

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Hi,

Thank you for your query. 

FreeAgent is predominantly designed with micro entities and sole traders in mind, so we don't currently have plans to amend the property function.  However, I will pass your comments and vote to our feature request list for this. 

Kind regards, 
Kirsten 
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Marc Woods

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Hello


I have followed the above instructions, and the capital asset does not show under Accounting \ Reports \ Capital Assets.

yet it does show under Accounting \ Reports \ Balance Sheet as Other Capital Assets

why is this, 
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Cameron Livingstone, Employee

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Hi Marc,

Thank you for your email.

Capital assets entered via this method won't show in the capital asset register, nor will FreeAgent post automatic depreciation on them.

If you would like your brought forward capital assets to show on the capital asset register, can I please ask you to email our support team at support@freeagent.com to ensure we give you the right steps involved. Thanks.

Kind regards,


Cameron