Do I record cash I invested and used for capital improvements of a RE on BS or do I record it as an equity in the building?
submitted by Inna

Morgoon

I'm going to assume that RE means "real estate" and BS means "balance sheet."

When you invest cash into a real estate property for capital improvements, the correct accounting treatment is to record the funds as an increase in the property's basis, rather than as a separate line item of equity in the building. Specifically, the cash invested should be added to the property's capital account or basis. That will show a an increase in the asset's value.

If the investment is made by an owner or partner, it is typically recorded as an equity contribution (e.g., "partner's capital" or "owner's equity"). The key distinction is that cash invested for improvements enhances the property's value. That would be reflected on the balance sheet as part of the property's carrying amount, not as a separate equity line in the building itself. Any contributions or withdrawals by owners are recorded as equity transactions.

rankled_noyvez

If you put cash into a building to make improvements, you usually record that as part of the building's value on the balance sheet, not as a separate equity in the building.

Think of it like adding to the property's cost basis. If you're the owner, you might also record it as your ownership equity, but generally, it's included in the overall value of the building on your books.