“In accounting, how do you post a land purchase?”
Of course, I promptly turned this over to Maesz, our resident accounting expert. Here’s her reply:
This is for a pure land purchase — no buildings, fences, wells, etc (technically these must be assigned value at purchase and then depreciated).
The check for the purchase of the land decreases (credit to) cash/checking and creates (debit to) an asset of land (non-depreciable). That way it shows up on the balance sheet as an asset at cost.
The cash “received” from any mortgage increases (debit to) cash/checking; the mortgage beginning amount enters as (credit to) a liability.
The interest on the mortgage is a deductible expense (debit) and the principal payments decrease (debit) the balance of the mortgage/liability due. The “credit” side of this entry is the payment from cash/checking.
Land is a non-depreciable asset. I always just put in an asset account; “brand” it non-depreciable.
Land is an asset, not an expense.
Improvements on land have to be accounted for separate from the land.
If you need help with a specific case, check with a local accountant for details.
And if you have a small business question, we’ll be glad to try to answer it. Just ask in the comments.
- How has 2020 changed the challenges rural small towns face? Tell us here - October 20, 2020
- The Idea Friendly Method to surviving a business crisis - October 6, 2020
- Join me for the Rural Renewal Symposium online Oct 13 - September 26, 2020
- Cheap placemaking idea: instant murals - September 11, 2020
- Refilling the rural business pipeline - July 7, 2020
- Huge vacant buildings: grants to renovate? - June 9, 2020
- Economic self defense for small towns - June 7, 2020
- The best things you can do for local businesses in light of coronavirus - March 27, 2020
- How to get more parking downtown without adding any spaces - March 7, 2020
- Exact Yeti Blue mic volume and Windows settings to reduce background noise - February 17, 2020