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Cushmans
April 30, 2022
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Question about categorizing a transfer of rental income TO a property management company FROM the landlord?

  • April 30, 2022
  • 1 reply
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I own a rental property business.  I had property management company manage one of my properties for a while.  After the management company took over, they were to collect rent from the tenants.  I collected rent from one of the tenants as they paid me instead of the property management company.  I deposited the check and received it in as income.  I then wrote a check to the property management company for the same amount, as they were supposed to manage the money and use it if needed to cover any expenses on the property that they needed to take care of.

How do I categorize this transfer of the rental income from me (the landlord) to the property management company?

Eventually, most of this income flowed back to me in the form of an owner's disbursement from the property management company, but I'm not sure how to categorize sending it over to them.

Best answer by Rainflurry

@Cushmans 

 

Yeah, sorry about that, I could have given more detail.  No need to do journal entries, just make a deposit and then write a check. 

 

Easiest way:

1) Create an other current liability account called "Due to Management Co."

2)  Deposit check from your tenant (+New > Bank Deposit). Choose the new "Due to Management Co." liability account under 'Account'.  You can add more details if you want.

3) Write a check to your management co. (+New > Check).   Select the management co. as payee and the new "Due to Management Co." liability account under 'Category'.  Save and close.

4) All done.

1 reply

Rainflurry
Rainflurry
April 30, 2022

@Cushmans 

 

Record the payment received from the tenant as a current liability instead of income since that is what it is - you owe that money to the property management company.  Then, assign that same liability account to the check written to the management company - this will remove it from the liability account.  Then, you will have the deposit and check to reconcile on your bank statement and the amount received and paid will stay off of your P&L.  

C
CushmansAuthor
April 30, 2022

@Rainflurry I understand what you are saying, but not exactly sure how to go about entering it.

 

1) I do not have a general "Other Current Liabilities" account.  Do I need to create one, or would it fall under one of the default ones? (Customer prepayments, Lines of credit, Short-term business loans, etc...)

2) Do I need to enter this as a Journal entry, or do I do it in a different manner in QBO? I assume a JE

3) Do I also have to do a Journal entry for the check I write to the management company, or can I use the Expense option and do it within that window? I think Expense option would work to make the payment to the property management company.

 

Example below:

Transaction 1 - Journal Entry

Debit Bank Account account $650 (Put Tenant/Customer under the Name field)

Credit  Customer Prepayments account $650     (This may not be the correct Current liabilities account.)

This increases money in the bank and also increases the current liabilities.

 

Transaction 2 - Expense

Payee - Property Management Company

Payment account selected as the same one I originally put the money in

Category - Customer Prepayments account

Amount $650

This should decrease the funds from the bank account, and decrease the "current liabilities because it's going against the customer prepayments account (or whichever other correct account under current liabilities).

 

Does this look correct to you?

Rainflurry
RainflurryAnswer
April 30, 2022

@Cushmans 

 

Yeah, sorry about that, I could have given more detail.  No need to do journal entries, just make a deposit and then write a check. 

 

Easiest way:

1) Create an other current liability account called "Due to Management Co."

2)  Deposit check from your tenant (+New > Bank Deposit). Choose the new "Due to Management Co." liability account under 'Account'.  You can add more details if you want.

3) Write a check to your management co. (+New > Check).   Select the management co. as payee and the new "Due to Management Co." liability account under 'Category'.  Save and close.

4) All done.

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