Setting Up A Chart of Accounts For A Property Business: How and Why?

One of the first critical tasks when setting up your commercial real estate business is establishing a solid chart of accounts. This foundational tool organizes all your financial data, providing clarity and structure to your financial record-keeping. In this guide, we'll walk you through the essential steps for creating a chart of accounts tailored to a commercial real estate company.

Why a well-structured chart of accounts matters?
What are the key components of a chart of accounts?
What we recommended for account structure
Tracking multiple properties
Using classes for enhanced tracking

Why a well structured chart of accounts matters?

A well-constructed chart of accounts is more than just a list of accounts; it’s the backbone of your financial management system. It allows you to:

Organize Financial Transactions: Every financial transaction is linked to a specific account, ensuring that your records are precise and complete.
Communicate Financial Information: Whether sharing data with bankers, accountants, or investors, your chart of accounts provides a clear picture of your financial health.
Simplify Tax Filing: By categorizing transactions properly, you can streamline tax preparation and compliance.
Make Informed Decisions: A detailed and organized chart of accounts enables you to monitor your business performance, identify trends, and make data-driven decisions.

Starting with a well-structured chart of accounts can save you from costly rework and help you see your business operations clearly from the outset.

Key Components of a Chart of Accounts

The chart of accounts is generally setup within your accounting platforms, which means you don't have to set it up inside of your property management solution. With Re-Leased you have extensive two way integrations into a number of different specialised accounting systems that automatically pull through data from your accounting systems.

At its highest level, a chart of accounts for a commercial real estate business includes the following categories:

Assets
Liabilities
Equity
Revenues
Expenses

While there is no universally standardized format for a chart of accounts, a typical structure groups accounts into blocks (e.g., 1000-1999 for assets) to allow for flexibility and growth as your business expands.

What we recommend for account structure

Below is a suggested numbering scheme for your chart of accounts broken by type. This framework is designed to accommodate the unique needs of a commercial real estate business:

Number	Main Category	Purpose
1000 - 1999	Assets (This includes Bank, Fixed Assets)	Bank accounts, commercial properties, equipment, etc.
2000 - 2999	Liabilities (Can be long-term liabilities or short term)	Mortgages, loans, accounts payable, etc.
3000 - 3999	Owner's Equity	Owner contributions, retained earnings
4000 - 4999	Revenues/ Income	Rental income, management fees, other income
5000 - 5999	Cost of Goods & Services Sold (COGS)	Costs directly related to providing services or products
6000 - 7999	Expenses	Operating expenses, utilities, maintenance, etc.

Here is a more detailed chart of accounts

Here is a more detailed breakdown of individual accounts that a commercial real estate business might use:

Account Number	Account Description	Type	Use
1100	Checking Account	Bank	Record all deposits and withdrawals
1200	Escrow Account	Bank	Funds held for property taxes, insurance, etc.
1400	Accounts Receivable	Asset	Unpaid rents and other receivables
1600	Land	Fixed Asset	Value of the land associated with each property
1700	Property Improvements	Fixed Asset	Capitalized property improvements
1800	Accumulated Depreciation	Fixed Asset	Depreciation of properties (excluding land)
1900	Commercial Property	Fixed Asset	Value of each commercial property owned
2500	Credit Cards	Liability	All credit card transactions
2600	Mortgages	Long-Term Liability	Mortgages associated with each property
3000	Owner’s Equity	Equity	Owner investments and retained earnings
4100	Rental Income	Income	Rental income from properties
4200	Other Income	Income	Income from services like parking fees, storage, etc.
6000	Marketing Expense	Expense	Advertising, promotional expenses
6100	Professional Fees	Expense	Legal, accounting, consulting fees
7000	Operating Expenses	Expense	Utility costs, repairs, maintenance, etc.
7100	Property Taxes	Expense	Taxes on owned properties
7200	Insurance	Expense	Insurance premiums for properties
7700	Management Fees	Expense	Fees paid to property management firms
7900	Repairs and Maintenance	Expense	Costs associated with property upkeep
8000	Utilities	Expense	Water, gas, electricity expenses
8500	Office Supplies	Expense	General office expenses
8700	Miscellaneous	Expense	Other expenses that don’t fit into specific categories

The above chart of accounts will vary if your business only manages property instead of owning it.

Tracking Multiple Properties

To manage multiple properties effectively, consider setting up sub-accounts under your main accounts. For example:

Account Number	Account Description	Type	Property
1900	Property - Main	Fixed Asset
1901	123 Britomart	Fixed Asset	Property 1
1902	456 Wynyard Quarter	Fixed Asset	Property 2
1903	346 Ponsonby Road	Fixed Asset	Property 3