I am thinking of starting a business. I am looking at buying to rental property. Would the property be classed as an asset in my accounts, or a liability until I have paid the mortgages?
submitted by Amy Lee

payattentionclass

This is where it's important to distinguish whether you're talking about accounting or investing. If you're talking about keeping your books accurate, it's definitely an asset.

So, on your financial statement, the rental property would be classified as a non-current asset. The value of the property would typically be the purchase price, plus any other associated costs that went with the purchase.

Because double-entry is the way of accounting, you're documenting both the property and the mortgage that goes with it. The mortgage liability is recorded separately as a liability. As you make mortgage payments, the liability decreases, but the asset remains on your books at its carrying amount. Therefore, until the mortgage is fully paid, the property appears as an asset on your balance sheet, with the mortgage as a liability.

dis_missed

Think of the property as an asset because it has value and can generate income when rented out. The mortgage you owe on it is a liability because it's money you owe to the bank. So, in your accounts, the property is an asset, and the loan is a liability until you pay it off.

juan_the_fisherman

Basically, the property counts as an asset because it's something you own that can make you money. The mortgage is a debt, so it's a liability. Even if you haven't paid off the mortgage yet, the property is still an asset on your financial statements.

sathy willy

The property is an asset because you own it. If you sold it, you'd make money. Therefore, it's an asset.

The mortgage is a liability because you owe money. So, until you pay it off, the property is an asset, and the mortgage is a liability. You have to account for each separately. Accounting is very thorough like that.