Canada Purchase of a building in 2020 and recording it in 2021


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Hi,
I am about to start using QuickBooks online to do my bookkeeping from January 1st, 2021 moving forward. Prior to that, I have been doing manual bookkeeping using Excel. I have an issue with my initial starting point of January 1st, 2021. The issue is: I bought a building let's say for 555k in late December 2020 with 355k cash from the Checking account and 200k from a Mortgage loan. So in order to record that in QBO on January 1st, 2021 will I debit the Buildings account for 555k and credit the Mortgage payable account for 200k and credit the Retained earnings account for 355k? If the 355k do not go into the Retained earnings account, in which account then they will be placed in as of January 1st, 2021 (my starting initial day in QuickBooks online)?

Thank you for your help
 
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I am not sure how you are initially showing your cash, but at purchase, your entry should be:

Dr 555K - Building
Cr 200K - Note payable
Cr 355K - Cash

RE should not be touched.
 
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I am not sure how you are initially showing your cash, but at purchase, your entry should be:

Dr 555K - Building
Cr 200K - Note payable
Cr 355K - Cash

RE should not be touched.
Thanks @onebadasset for your reply. If I do what you said I will have negative Cash of (355k) on January 1st, 2021 but that is not reflected in my Cash bank account which let's say was 0 on January 1st, 2021 because I have already paid the Building in December. So to have a balance sheet that balances I thought of something like this on January 1st, 2021 (my initial setup):
Asset:
Cash = 0
Buildings = 555k
Liabilities
Mortage Payable = 200k
Equity:
Retained Earnings from 2020 = Beginning Retained Earnings for 2021 = 355k

What do you think?
 
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Retained earnings should be hit only in rare circumstances.

How did you record the transaction in your excel spread sheet? When you reduced your cash by 355K, what other account did you hit, an expense account?
 
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Retained earnings should be hit only in rare circumstances.

How did you record the transaction in your excel spread sheet? When you reduced your cash by 355K, what other account did you hit, an expense account?
In my Excel in December 2020:
Dr 555K - Building
Cr 200K - Mortgage payable
Cr 355K - Cash

My issue is with the initial setup on Quickbooks. So on January 1st, 2021
I will start with
0 in Cash as in my bank account
555k in Building
200k in Mortage Payable
355k in what account? <==== that's my question
 
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In that case you wouldn't touch the RE (assuming your B/S balanced when you had the cash). The RE would not be effected in this transaction.

Ex. If you had no other accounts, your balance sheet in Dec prior to purchase is

Cash 355

RE 355

Then after the purchase in Dec it would be

Cash 0
PPE 555

NP 200
RE 355

You would have no reason to hit RE. You would import your opening balances to whatever your excel book values are.
 
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In that case you wouldn't touch the RE (assuming your B/S balanced when you had the cash). The RE would not be effected in this transaction.

Ex. If you had no other accounts, your balance sheet in Dec prior to purchase is

Cash 355

RE 355

Then after the purchase in Dec it would be

Cash 0
PPE 555

NP 200
RE 355

You would have no reason to hit RE. You would import your opening balances to whatever your excel book values are.
That's good to know. Thank you. But since my excel book is a mess and I don't know to import it to QuickBooks and I would like to start clean and fresh on January 1st, 2021 with QuickBooks I thought I will just make journal entries manually for this first day by entering manually what you just said. Namely:
Cash 0
PPE 555

NP 200
RE 355
 
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In that case you wouldn't touch the RE (assuming your B/S balanced when you had the cash). The RE would not be effected in this transaction.

Ex. If you had no other accounts, your balance sheet in Dec prior to purchase is

Cash 355

RE 355

Then after the purchase in Dec it would be

Cash 0
PPE 555

NP 200
RE 355

You would have no reason to hit RE. You would import your opening balances to whatever your excel book values are.
Hi @onebadasset I'm coming up with a new idea. I got inspired from the link https://www.freshbooks.com/hub/accounting/debit-and-credit
There we can find as examples of Equity Accounts the following accounts:

  • Available-For-Sale Securities
  • Stocks
  • Bonds
  • Mutual Funds
  • Real Estate
  • Pension and Retirement plans
  • Derivative Instruments
  • Debt Security
So why instead of setting the RE to 355k on January 1st, 2021 why don't I create an account like Real Estate and set its starting value at 355k and never touch RE ? so everything balances like this on my starting day of January 1st, 2021:
Buildings 555
Mortage payable 200
Real Estate 355
 
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I have never personally seen this done before. If it were my books, it would go into a RE/owners equity account.
 
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I have never personally seen this done before. If it were my books, it would go into a RE/owners equity account.
I think you are right @onebadasset because it is stated in this link https://opentextbc.ca/principlesofa...trast-owners-equity-versus-retained-earnings/
"The stockholders’ equity section of the balance sheet for corporations contains two primary categories of accounts. The first is paid-in capital, or contributed capital—consisting of amounts paid in by owners. The second category is earned capital, consisting of amounts earned by the corporation as part of business operations. On the balance sheet, retained earnings is a key component of the earned capital section, while the stock accounts such as common stock, preferred stock, and additional paid-in capital are the primary components of the contributed capital section."

So the Real Estate account I was thinking about falls in the category of paid-in capital and not earned capital as is my case. So the 355k goes to RE which is indeed an earned capital. Thanks for your help
 

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