An accounting or bookkeeping background is helpful when preparing taxes. This part of the lesson goes over the accounting entries needed to properly record the asset purchase in the bookkeeping or accounting system. The video CPA tax preparation school has courses in basic bookkeeping you will have to take to become a proficient tax preparer.
Example
Your client purchases a residential rental on May 15, 2019, for $250,000. You agree with him that $50,000 of the purchase price should be allocated to land. The HUD 1 settlement statement shows expenses associated with obtaining a loan of $4,500. The loan fees were rolled into the note. Your client obtained a mortgage loan of $230,000 to purchase the property and paid $20,000 down.
Entry needed to record the purchase of the property:
Residential rental $254,500, Cash $ 20,000, Mortgage note $234,500
If you desire more detail in your records you could make a more detailed entry that looks like the following:
If the lending fees were rolled into the loan, the entries would be a bit different. The additional detail in the second entry is helpful but not necessarily needed because the three parts of the asset purchase should be included in the depreciation schedule. When we get to the lesson on rental property expenses you will see how the note payments are adjusted for interest and how the periodic depreciation is recorded.