Part 3 of this series of Spec & Custom Bookkeeping Overview deals with the purchase of the Land Lot (for Spec work) and the corresponding loan to pay for both the Lot and the Construction Funds to Draw.
It is recommended that you utilize a journal entry to capture the following:
- Purchase price of the Land Lot
- Closing Costs
- Construction Funds to Draw
- Previous Earnest Money paid
- Total amount of the overall loan
- Cash you contributed from this settlement
So, here is an example of a journal entry based on a H.U.D. settlement statement:
|Inventory: Home||56,000||Purchase price of the lot|
|C.I.P. – Spec||2,345||Closing Costs|
|Construction Escrow: Home||180,000||Construction Funds to Draw|
|Inventory: Home||2,000||Previous Earnest Money Paid|
|Loan Payable||205,000||Principal amount of new loan|
|Bank Account||31,345||Cash paid from buyer|
Please keep in mind that the above journal entry is just one example of how this event can be recognized in the books; but please consult with your C.P.A. for your particular guidance.
Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.