Darwin Cloud

Accounting for Commercial Leases

Updated on

Important: this is an alternative option for handling the accounting for Commercial leases. This methodology is for the circumstances where commercial lease payments come in parts before the agent is paid their commission.

Add Landlord as the person that will be invoiced

When a new lease is created and before any money is received, Create the landlord as a customer in darwin.Cloud.

Add Customer

Accounting Period in darwin Cloud

  1. Put landlord name in the last name field
  2. Put the property address in the company name field
  3. Set person type as:  Landlord / Owner

Give people with your role the permission to work with the new person type you created. In this example:  Landlord / Owner

  1. Select from: not allowed. This will enable you to add and view new Person records of this type.
  2. Click save.

    Note that you will need to log out / log in to get these modified security permissions

Add an invoice to this Landlord for the full amount of the lease

1. Set order type as: Commercial lease

  1. You can charge this amount to any GL account you choose, but a balance sheet account would be the most sensible as a mechanism to track the receivable without recognizing the income until all the commission has been received.
  2. Add any description you want that will be helpful to you.
  3. Record the full amount of the lease
  1. Find the Property record related to the lease and open it.
  2. Click:  add prepayment
    In the windows that pops up:
  3. Enter the check number received
  4. Enter the date of the payment
  5. Type the name of the person / company that paid the commission
  6. Enter the amount of the payment
  7. Click Save.

Note - this pre-payment you recorded on the property will appear in undeposited items on the Deposit screen.  You can add these funds received to your daily deposit as you would with any payments received

Find the invoice for the lease and unpost the invoice

Note - We recorded the payment on the property record, so never record a payment on the original invoice.  Simply modify the invoice to record a credit for the amount received.

Find the original lease payment that you added, and then unpost the invoice

  1. Search for the invoice
  2. Click the Unpost button.  The invoice will be unposted and the button label will change to: post

Reduce the amount owed on the invoice you created

  1. Add a new row with the same office & GL account number.  Enter a meaningful description.
  2. Enter a negative amount equal to the deposit received
  3. POST

The receivables due to the company on this lease will now show the amount due adjusted for the payment received

  1. The balance due to the company has been reduced by the amount you received.

The Property record has a receipt of the deposit made in advance of closing this transaction and paying the agent

  1. The property record shows the total amount of commission to be collected
  2. The comm. deposits paid in advance shows how much has been paid so far
  3. The amount due shows the balance that the landlord still owes.

As you continue to receive payments from the landlord, the property show increasing amounts of "deposits paid in advance".  When the deposits paid in advance is equal to the commission, you can close this property and pay the agent.

When you POST this property and pay the agent, you will not record any payments received because all the payments were received in advance.  Upon POST, all the pre-payment credits for this property will be automatically applied to this transaction.

Previous Article Accounting Period locks technical information
Next Article Correcting a Posted Payment of a Payable