What do I do with an (unknown) increase in home value?

Discussion in 'Accounting' started by semi-ambivalent, Sep 11, 2011.

  1. Hi all, got a newbie's question.

    Let's say I value my house at $100.00 in my accounting software (as an
    opening balance). We have just completed some renovations that
    certainly increased its value, and, even in this market, its sellable
    price. The cost of the renovations are tracked as expenses but where
    would the estimated increase in 'sale value' go? Just to balance the
    transaction I've place the increase in a Balance Adjustment account
    but shouldn't it really go as an Equity amount which I could adjust to
    reality once the house is sold? I base the 'value' of the house on a
    number the mortgage holder says it's worth; however inaccurate that
    might be :)

    thx!

    s-a
     
    semi-ambivalent, Sep 11, 2011
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  2. semi-ambivalent

    KRHoffmanCo

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    KRHoffmanCo, Sep 12, 2011
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  3. Your renovation costs are not "expenses" but are part of what adds to your
    increased value, so book them to the house to increase your cost basis.

    If you are tracking the change in value, then book that change to a
    "unrealized market value of house", which would be a contra asset account
    and a corresponding entry to a similarly titled income or expense account.
     
    paulthomascpa, Sep 12, 2011
    #3
  4. Value (basis) is what you paid for it. This value does not include
    interest. If this is personal property you add major
    improvements/renovations to that value. If it is a repair then it is an
    expense. Personal property does not get depreciated. If it is rental
    property the renovation is recorded separately and depreciated separately.
    Again, this is for renovation, not repairs.
     
    Michael Dobony, Oct 16, 2011
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  5. semi-ambivalent

    scottlouie123

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    Value (basis) is what you compensated for it. This value does not include interest. If this is individual residence you add major improvements/renovations to that value. If it is a fix then it is an expense. Personal residence does not get decreased. If it is rental property the remodeling is documented independently and decreased independently.Again, this is for remodeling, not maintenance.
     
    scottlouie123, May 25, 2013
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