𝑨𝒇𝒕𝒆𝒓 𝒓𝒆𝒗𝒊𝒆𝒘𝒊𝒏𝒈 𝒕𝒉𝒆 𝒃𝒐𝒐𝒌𝒔 𝒇𝒐𝒓 𝒂 𝒓𝒆𝒂𝒍 𝒆𝒔𝒕𝒂𝒕𝒆 𝒅𝒆𝒗𝒆𝒍𝒐𝒑𝒆𝒓, 𝑰 𝒔𝒉𝒐𝒘𝒆𝒅 𝒉𝒊𝒎 𝒕𝒉𝒂𝒕 𝒉𝒊𝒔 𝒃𝒐𝒐𝒌𝒌𝒆𝒆𝒑𝒆𝒓 𝒉𝒂𝒔 𝒄𝒓𝒆𝒂𝒕𝒆𝒅 𝒂 𝒈𝒊𝒈𝒂𝒏𝒕𝒊𝒄 𝒎𝒆𝒔𝒔 𝒐𝒇 𝒉𝒊𝒔 𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒊𝒏𝒈 𝒓𝒆𝒄𝒐𝒓𝒅𝒔.

 𝑨𝒇𝒕𝒆𝒓 𝒓𝒆𝒗𝒊𝒆𝒘𝒊𝒏𝒈 𝒕𝒉𝒆 𝒃𝒐𝒐𝒌𝒔 𝒇𝒐𝒓 𝒂 𝒓𝒆𝒂𝒍 𝒆𝒔𝒕𝒂𝒕𝒆 𝒅𝒆𝒗𝒆𝒍𝒐𝒑𝒆𝒓, 𝑰 𝒔𝒉𝒐𝒘𝒆𝒅 𝒉𝒊𝒎 𝒕𝒉𝒂𝒕 𝒉𝒊𝒔 𝒃𝒐𝒐𝒌𝒌𝒆𝒆𝒑𝒆𝒓 𝒉𝒂𝒔 𝒄𝒓𝒆𝒂𝒕𝒆𝒅 𝒂 𝒈𝒊𝒈𝒂𝒏𝒕𝒊𝒄 𝒎𝒆𝒔𝒔 𝒐𝒇 𝒉𝒊𝒔 𝒂𝒄𝒄𝒐𝒖𝒏𝒕𝒊𝒏𝒈 𝒓𝒆𝒄𝒐𝒓𝒅𝒔.

All projects under construction are classified as capitalized assets shown on the Balance Sheet until sold where it will be moved to the Profit & Loss statement.

The bookkeeper has recorded all the project expenses on the Profit & Loss statement instead of creating an accumulated project cost.

When I asked what was the “all in” figure as of today for total cost he provided me with the purchase price that was shown on the Balance Sheet.

Here’s what happens using the current scenario.

Purchase price $250,000 – on the Balance Sheet
Expenses $750,000 – on the Profit & Loss over multiple years
Sells the project for $1,500,000 – Bookkeeper will record a profit on the Profit & Loss for $1,250,000

I̳f̳ ̳t̳h̳e̳ ̳p̳r̳o̳j̳e̳c̳t̳ ̳c̳o̳s̳t̳ ̳a̳c̳c̳o̳u̳n̳t̳i̳n̳g̳ ̳w̳a̳s̳ ̳d̳o̳n̳e̳ ̳c̳o̳r̳r̳e̳c̳t̳l̳y̳,̳ ̳t̳h̳e̳ ̳d̳e̳v̳e̳l̳o̳p̳e̳r̳ ̳s̳h̳o̳u̳l̳d̳ ̳h̳a̳v̳e̳ ̳o̳n̳l̳y̳ ̳r̳e̳c̳o̳r̳d̳e̳d̳ ̳p̳r̳o̳f̳i̳t̳ ̳o̳f̳ ̳$̳5̳0̳0̳,̳0̳0̳0̳.̳

To avoid incorrect accounting, having to file revised tax returns and ensure that the project cost is being done correctly hire someone who is knowledgeable in the real estate accounting industry.