Hello
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Client account
It isn't their money ... it is the clients, therefore not income! If not income, then no expense either.
Be aware, there are special regulations re this type of client money account and the administration of it. I cannot remember all the details, but they are quite onerous.
Client Account
Firstly it is imperative to keep separate the transactions of the office account and that of the client account.
In your example, the £100 (inc vat) should be transferred (physically) which is income for the letting agent and declared on to the vat return. The balance is transferred to the landlord.
At any given point in time, the client bank account should always mirror the creditor also called client account. If it doesn't there is a problem.
Finally check the association they are registered with i.e. RICS, ARLA as they have strict rules for client monies.
Double entry...
It may be easier to understand in terms of double entry...
Debit Client Account 1000
Credit Rents to Landlord Account 1000
Being rent received from tenant
Debit Rents to Landlord Account 900
Credit Client Account 900
Rents forwarded to landlord (minus commission)
Debit Rents to Landlord Account 100
Credit Commissions receivable 86
Credit Vat Control 14
Being commission
I hope the above helps to understand that the £900 does not touch the P&L account at all
I know I'm a little late joining this discussion(!), but it's very relevant to my own situation.
If the letting agent offers a 'fully managed service', i.e. organises maintenance, cleaning etc., do such costs also stay off the P&L?
The agency handles a lot of properties and they would ideally like to report on the different costs (compare properties, periods etc.) but if these costs are just deducted from the landlord account on the BS, it's going to be difficult to report on them.
Thanks in advance.
Mark, everyone that was involved in the question from 8 years ago is dead after the cataclysmic effect of an asteroid crashing to earth.
The income of a letting agency is derived from the commission earned from landlords from one or more services in respect of letting their property. That’s about it.
It is usual for such an agency to operate specialist software which may or may not interface automatically with the accounting system to provide the management information you seek.