THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SOUTHERN BRANCH UNIVERSITY OF CALIFORNIA LIBRARY LOS ANGELES, CALIF. Library Graduate School of Business Administration' Real Estate Accounts Treating of the Proper Classification, Con- struction, and Operation of Accounts for the Real Estate Business, including Forms By WALTER MUCKLOW, C. P. A. Member American Institute of Accountants NEW YORK THE RONALD PRESS COMPANY Copyright, 1917, by THE RONALD PRESS COMPANY Bus. Admin. Library HF R3M8 PREFACE It is a curious circumstance that, although accountants generally recognize the value of real estate as an asset, and j^ frequently give evidence of that belief by assigning it a certain pre-eminence when marshalling assets or arranging a balance sheet, there is little literature on the subject of ^ real estate accounting, either here or abroad. One reason for this may be found in the fact that, until 1* recently, we have been almost entirely dependent upon Eng- , land and Scotland for our accountancy literature ; and in ^ those countries there is not the constant development of wild lands, timber tracts, and suburban properties, nor the ^ large and rapid increase in the growth of cities, so evident , throughout the United States; nor is there that habit of y? quick trading which here has become a second nature. Un- der such circumstances it is but natural that across the Q ocean the matter has been overlooked or postponed; and on this side of the water accountants have been so fully occupied in keeping abreast of their work that they have had but little time at their disposal in which to tell others what they are doing. A writer in the United States treating of this subject, is then, in a sense, a pioneer and may with propriety beg for himself and for his book the consideration and the al- lowances usually conceded to pioneers in all fields. While the main foundations of accounts are identical throughout the world, and it is, for example, as unwise in Finland as in Florida to anticipate profits or to allow a fictitious valuation of assets, the structures raised on these foundations may vary as greatly as do the winter quar- iii IV PREFACE ters of a Finn and those of a Floridian. Under these cir- cumstances it is unavoidable that many of the instances and examples given in the following pages should be almost pointless outside of the United States, although the author has endeavored to present principles in a form so broad, and to give examples of a character so typical, that they may be of some service wherever real estate accounting is employed. While no originality is claimed for the principles which are enunciated, the methods which are advocated, together with nearly all the forms presented, are the results of the author's personal practice ; no merit, however, is claimed for the fact that they have originated with him and have not been "compiled" from other sources, the simple reason for this being that he has been unable to find any sources from which it was possible to compile. Special attention is given to the treatment of "time sales," and the procedure described is original and is de- veloped to a greater degree than has been general. The rapid growth of "development" companies, the lack of uni- formity, and the frequent disregard of the principles in- volved, all combine in calling for a rather full treatment of this interesting branch of the subject. Legal questions w r ill frequently arise in connection with real estate accounting, and to a lawyer the legal statements of the present volume may appear meager and crude. The author has, however, attempted to give merely such ex- planations of these matters as are necessary to enable the real estate accountant to make his entries intelligently and in conformity with legal requirements. No attempt has been made to give examples of the various legal forms employed in connection with real es- tate, such as deeds and contracts. They already occupy much space in many volumes ; and the general usefulness of PREFACE v such a collection, unless it is complete, is impaired by the fact that the forms, while perhaps excellent for Illinois, for example, may utterly fail to comply in some essential with the statutory requirements of other states. The object of bookkeeping is to show not only the re- sults obtained by an enterprise, but also the causes of these results not only to exhibit a gain or a loss, but to show whence came the values gained, or whither went the values lost. The very form of a trading statement or of a profit and loss account shows on its face that this is the object of its existence. But while the truth of this statement is gen- erally acknowledged, many accounts may still be found which fail, in this respect at least, to justify their being. In real estate accounting, where each item of the in- ventory has an individuality entirely lacking in the case of merchandise or manufactured goods, both cause and effect may be shown with unusual clearness. In the present work this fact has been kept constantly in view, and the methods of accounting presented will be found to show clearly at all times both the results and the reasons therefor even for a single lot of a large subdivision. The present work is intended primarily for the use of accountants, but, inasmuch as it is designed also to be of practical service to the real estate manager, the bookkeeper, and the student, considerable space is devoted to details with which accountants are already familiar. It is assumed, of course, that all those who use this volume have at least a rudimentary knowledge of double-entry bookkeeping. It may also be said that real estate is so closely related to a large variety of enterprises which are not primarily concerned with real estate, that a study of real estate ac- counting proper involves some knowledge of these other businesses. While, therefore, the present volume is devoted to real estate accounting, digressions have at times seemed VI PREFACE necessary, in order to explain particular points of contact with other kinds of business. \Yhile the author believes that the theories presented and the practice outlined in the present volume are sound, his readers will doubtless discover matters of importance which have been omitted, and other matters which are not presented as clearly as they might be. Suggestions looking to a betterment of the book in any way will be received with gratitude, and will be utilized in the preparation of subsequent editions. The author's fairly wide professional experience con- vinces him that one suggestion may not be entirely out of place. A patient might read treatises on the disease from which he suffers, but he would consult a physician to pre- scribe the remedy; and a wise land owner about to erect an office building would secure all the information on the subject obtainable, but he would engage an architect to draw the plans. In the same way, it is to be hoped that the manager of a real estate concern will not, when im- portant accounting matters of a technical nature are on hand, trust solely to any treatise on real estate account- ing, but will seek the assistance of a trained and qualified accountant. WALTER MUCKLOW. Jacksonville, Florida, June 15, 1917. CONTENTS* CHAPTER PAGE I DEFINITIONS i I. Definitions of Terms II RECORDS FOR REAL ESTATE 4 2. Records Required 3. Use of Records to Officers 4. Loose-Leaf and Card Records 5. List of Real Estate Records 6. Separate Books for Each Class of Accounts 7. Condensed Records III CORPORATE RECORDS n 8. Minute Book 9. Stock Certificate Book 10. Stock Record or Stock Ledger n. Subscription Ledger IV GENERAL BOOKS OF ACCOUNT 16 12. General Receipt Book 13. Cash Book 14. Petty Cash Book 15. Superintendent's Cash Book 16. Journal 17. General Ledger V SUB-LEDGERS 30 18. Mortgages Receivable Ledger 19. Mortgages Payable Ledger 20. General Contracts Ledger 21. Commissions Payable Ledger 22. Brokerage (Commissions Earned) Ledger 23. Subdivision Customers Ledgers VI PROPERTY RECORDS 45 24. Report of Real Estate Transactions 25. Property Index 26. Property Ledger Wild Lands 27. Property Ledger City Properties 28. Field Record 29. Subdivision Ticklers 30. Plat Book 31. Record of Deeds Received 32. Record of Deeds Issued 33. Record of Contracts Issued 34. Record of Options Granted 35. Subdivision Histories "For list of forms, see Index, page 343. vii viii CONTENTS CHAPTER PACE VII RENT RECORDS .... 74 36. Record of Leases Given 37. Rent Register (House Address Book) 38. Rent Receipt Books 39. Report of Rent Collections 40. Rent Cash Book 41. Rent Journal 42. Rent Ledger 43. Collector's Pocket Rent Ledger VIII MISCELLANEOUS RECORDS 85 44. Fire Insurance Record 45. Bills Receivable and Bills Payable 46. Land Notes 47. Mortgage Interest 48. Expense Account Analysis Book IX THE ACQUIREMENT OF REAL ESTATE 90 49. Methods of Acquiring Real Estate 50. Accounting Procedure 51. Entries Required 52. Mortgages Payable 53. Legal Obligations of Mortgagor 54. Contracts Payable 55. Trusts and Trustees X PROPERTY COSTS 96 56. The Elements of Cost 57. Treatment of Costs 58. Cost of Improvements 59. Repairs, Renewals, and Improvements 60. Definitions 61. Repairs XI CARRYING CHARGES . 102 62. Interest and Taxes 63. Interest as Part of Cost 64. Inventories at Cost 65. Interest on Cost 66. Treatment of Interest Charges 67. Depreciation as Affecting Cost 68. Taxes 69. Assessments 70. Cost of Maintenance and Operation 71. Profits on "Value" and "Investment" XII SALES OF REAL ESTATE no 72. Time Sales 73. Final Sales 74. Form of Entries Relating to Sales of Property 75. Legal Expenses 76. Surrender of Contract CONTENTS } x CHAPTKR PAGE XIII PROFITS FROM REAL ESTATE SALES 116 77. Definition of Profits 78. Sources of Profits 79. Profits from Sales 80. Cost Price 81. Selling Price 82. Earned Profit 83. Mortgage Assumed by Purchaser 84. Large Cash Payment Balance Secured by Mortgage 85. Small Cash Payment Balance Secured by Mortgage 86. Gain on Sales Account 87. Sales on Contract 88. Exchange of Properties 89. Appraisal of Property 90. Development Properties 91. Hidden Profits 92. Anticipated Profits XIV PROFITS FROM RENTS 125 93- Rent 94. Leases 95. Gross Rent and Net Rent 96. Net Rent and Net Returns 97. When Should Rents Be Entered ? 98. Rents from Mines and Similar Sources 99. Treatment of Mining Rents XV PROFITS FROM ENHANCEMENT OF VALUE AND FROM MISCELLANEOUS SOURCES 132 PROFITS FROM ENHANCEMENT OF VALUE loo. Increased Value of Mineral Lands 101. Enhanced Real Estate Values 102. Fluctuations in Real Estate Values 103. Bank Practice 104. Accounting Treatment 105. Rights of Stockholders 106. Effect of Enhanced Real Estate Values on Rent Charges 107. Summary PROFITS FROM MISCELLANEOUS SOURCES 108. Profits from Money Borrowed on Real Estate 109. Operation of Manufacturing Properties no. Operation of Agricultural Properties in. Operation of Orchards Increase in Value 112. Showing Profit on Annual Statements 113. Profits from Crops Other than Fruit X CONTENTS CHAPTER PACE XVI TIME SALES MORTGAGES 141 114. Time Sales 115. Classes of Time Sales 116. Mortgages 117. Mortgage Notes 118. The Instalment Mortgage 119. Annuity Tables 120. Change of Ownership 121. Foreclosures XVII TIME SALES CONTRACTS 152 122. Simple Form of Contract 123. Conditions Applying to Contracts 124. Precision as to Amount of Sale 125. Pass-Book Contracts 126. Cancellation of Contracts 127. Comparative Advantages of Mortgages and Contracts 128. Contract Statements 129. Contract Accounts XVIII OPTIONS . 163 130. Nature of an Option 131. Accounting Treatment of Options 132. Refusals 133. Deeds in Escrow XIX INTEREST 166 134. Mortgage Interest 135. Interest Adjustments 136. Unearned Interest 137. Unearned Interest Methods of Calcu- lating 138. Unearned Interest Alternative Methods of Calculating 139. Unearned Interest Various Examples 140. Unearned Interest Phraseology of In- terest Clause 141. Unearned Interest Journal Entries 142. Interest Accrued Not Due XX EARNED PROFITS AND BOOK PROFITS 178 143. Book Profits 144. Gains Distinguished from Earned Profits 145. Rule for Calculating Earned Profits 146. Anticipation of Earned Profits 147. Equity as a Basis for the Calculation of Profits XXI CANCELLATIONS OF TIME SALES . . . . . . 185 148. Time Sa-les and Cancellations 149. Amount of First Payment 150. Payments in Arrears 151. Accounting Treatment of Cancellations 152. Erroneous Cancellation Entries CONTENTS x i CHAPTER PAGE 153. Cancellation Profits Account 154. Cancellation of Subdivision Sales XXII SUBDIVISION, DEVELOPMENT, AND SUBURBAN PROP ERTIES 192 155. Acquirement 156. Release of Lots from Encumbrances 157. Cost Price of Property 158. Cost Per Lot 159. Cost Price When Improvements Are Incomplete 160. "Constant Cost Price" 161. Comparison of Cost Finding Methods 162. Check on Unsold Lots 163. Subdivision Property Expenses 164. Advertising Expense 165. Advances to Settlers XXIII EARNED PROFITS ON SUBDIVISION, DEVELOPMENT, AND SUBURBAN PROPERTIES 201 166. Determination of Earned Profits 167. The Cost Price 168. The Selling Price 169. The Average Profit 170. Amount of Payments Actually Made 171 Reserve Profit Account 172. Application of Rule 173. Alternative Methods 174. Special Subdivision Ledger 175. Use of Special Ledger 176. Holding Subdivision Properties XXIV SELLING CONTRACTS 214 1*7. Definition of Selling Contract 178. Classes of Selling Contracts 379. Treatment of Selling Contracts in the Accounts XXV ANALYSIS OF A TYPICAL TRIAL BALANCE . . . 217 180. Clean Bookkeeping 181. A Typical Trial Balance 182. (i) Accounts Payable 183. (2) Advertising 184. (3) Automobiles 185. (4) Bills Payable 186. (5) Bills Receivable 187. (6) Brick-yard Royalties 188. (7) Building Green 189. (8) Building Black 100. (9) Building Brown 191. (10) Cancellation Profits 192. (u) Capital Stock 193. (12) Charity xii CONTENTS CHAPTER PAI;K 194. (13) Commissions Earned; (14) Com- missions Paid 195- (15) Contracts 196. (16) Contracts Payable 197. (17) Dawes Purchase 198. (18) Directors' Meetings 199. (19) Unpaid Dividends 200. (20-23) Eureka Gardens Accounts 201. (24) Expense, General 202. (25) Expense, Legal 203. (26) Expense, Mortgage 204. (27-30) Fairmount Accounts 205. (31) Gain on Sales 206. (32-34) Grandville Accounts 207- (35i) Handbook 208. (30) Hilton, A. B. 209. (37) Improvements 210. (38) Fire Insurance, etc.; (39) Mort- gage Insurance 211. (40) Interest Earned; (41) Interest Paid 212. (42) Mortgage Interest Payable; (43) Overdue Mortgage Interest Payable 213. (44) Mortgage Interest Receivable; (45) Overdue Mortgage Interest Receivable 214. (46) Interest Unearned 215. (47) Judgments 216. (48-54) Kingslake Accounts 217. (49) Kingslake Purchase; (52) Kings- lake Lots 218. (50) Kingslake Gains 219. (51) Kingslake Expense 220. (53) Kingslake Commissio'ns 221. (55-60) Ladore Accounts 222. (59) Ladore Commissions 223. (60) Ladore Town Lots 224. (61) Life Insurance XXVI ANALYSIS OF A TYPICAL TRIAL BALANCE (Continued) 243 225. (62-65) Malvern Hill Accounts 226. Malvern Hill Determination of Profits 227. (66) Manning, R. 228. (68) Mortgages Payable; (69) Mort- gages Receivable 229. (67) Mortgage Deficiency Account ; (70) Mortgages in Settlement 230. (71) Office Furniture; (72) Office Fix- tures 231. (73) Options Granted; (74) Options Held 2 3 2 - (75-79) Parkville Accounts 233. (80) Petty Cash 234. (81) Postage 235. (82) Profit and Loss 236. (83) Profits CONTENTS xiii CHAPTER PAGE 237. (84-87) Prospect Park Accounts 238. (88) Real Estate 239. (89) Rent Account 240. (go) Repairs 241. (91) Rinders, T. ; (92) Rinders, T. ; Reserve 242. (93) Robinson, J., Trustee 243. (94) Salaries; (106) Stationery and Printing 244. (95-104) South Bay Accounts 245. (105) Sperry, J. M. 246. (107) Stumpage 247. (108) Suspense 248. (109) Taxes 249. (no) Mortgage Taxes 250. (111-114) Torbay Heights Accounts 251. (115) Treasury Stock 252. (116) Cash Superintendent 253- (117) Cash in Bank 254. Preparation of Balance Sheet XXVII THE TRIAL BALANCE AND MONTHLY STATEMENTS . 260 255. The Purpose of a Monthly Trial Balance 256. The Monthly Statement 257. Advantages of the Monthly Statement 258. Method of Preparing the Monthly State- ment 259. Determination of Earned Profits 260. Comparison of Monthly Statements 261. A. General Accounts 262. B. Expense 263. C. Earnings 264. D. Real Estate 265. E. Selling Contracts 266. F. Contracts 267. G. Profits in Reserve 268. H. Summary 269. I. Sales and Cancellations 270. J. Cash Receipts for the Month 271. K. Earned Profits Cash Receipts XXVIII THE BALANCE SHEET, THE ANNUAL REPORT, AND SCHEDULES 274 272. Nature of the Balance Sheet 273. Continental and English Forms of Bal- ance Sheet 274. Arrangement of Balance Sheet Items 275. Schedules Accompanying a Balance Sheet 276. Form of Balance Sheet 277. Schedules to Accompany Annual Report x iv CONTEXTS CHAPTER PAGE XXIX REAL ESTATE AUDITS 283 278. Real Estate Inventories 279. Verification of Real Estate Assets 280. Examination of Records 281. Mortgage Frauds 282. Details of an Audit 283. Methods of Conducting an Audit 284. Audit of Cash Receipts 285. Audit of Cash Disbursements 286. Audit of Property Ledger 287. Appraisals of Real Estate 288. Mortgages Receivable 289. Commission Accounts 290. Contracts 291. Auditing Subdivision Property 292. Subdivision Sales 293. Subdivision Histories 294. Equipment 295. Sundry Debtors 296. Capital Stock and Treasury Stock 297. Mortgages Payable, Contracts Payable, Bills Payable, Sundry Creditors 298. Purchase Accounts 299. Unpaid Dividends 300. Rents and Repairs 301. Reserve Accounts 302. Reserve Profits 303. Profit and Loss Account 304. Auditing Time Sales 305. Trustees' Accounts XXX AGENTS AND BROKERS, AND THEIR ACCOUNTS . . 300 306. Accounts for Office Buildings and Apart- ment Houses 307. Monthly Reports 308. Brokers' Records 309. Commissions XXXI REAL ESTATE ORGANIZATIONS 307 310. Abstract Companies 311. Leasehold Companies 312. Building and Loan Societies 313. Cemeteries 314. Cemetery Subdivision Accounts XXX II DEPRECIATION 313 315. Depreciation of Realty 316. Nature of Depreciation 317. Systemmatic Treatment of Depreciation 318. Percentage of Depreciation 319. Calculation of Depreciation . 320. Depreciation vs. Appreciation 321. Depreciation on the Balance Sheet 322. Depreciation on Leasehold Property CONTENTS xv CHAPTER PACK XXXIII INSURANCE RECORDS 319 323. Expiration Register and Card System 324. Life Insurance in Connection with Time Sales 325. Life Insurance in Connection with Mort- gages Payable XXXIV RENT RECORDS; BUILDING ACCOUNTS .... 324 RENT RECORDS 326. Rentals 327. Records Used 328. Repairs 329. The Rent Ledger 330. Arrangement of Rent Ledger 331. Rent Collectors 332., Vacant Houses BUILDING ACCOUNTS 333. Building Operations and Building Ac- counts 334. Building Operations Subdividing Costs XXXV TAXES 333 335- Entering Tax Payments on the Books 336. Mortgage Taxes 337. Descriptions 338. Federal Income Tax 339. Distinction Between "Gains" and "Profits" XXXVI FILING 339 340. Scope of Filing System 341. Consecutive Numbering 342. Sundry Documents 343. Ticklers Real Estate Accounts CHAPTER I DEFINITIONS i. Definitions of Terms Before dealing with real estate accounting, it is neces- sary to understand clearly what constitutes "real estate." The Century Dictionary gives the following definition: "Land, including with it whatever by nature or artificial annexation inheres with it as a part of it or as the means of its enjoyment, as minerals on or in the earth, standing or running water, growing trees, permanent buildings, and fences." Buildings, orchards, mines, etc., are therefore real es- tate and should be shown as such. It is not uncommon to find under the head of assets such an entry as Real Estate Buildings (or Improvements) This is incorrect, and should be of the form : Real Estate : Land $ Buildings In the present work, for the sake of brevity, uniformity, and clearness, the following words and phrases are used with the limited meanings given. It will, of course, be un- i 2 REAL ESTATE ACCOUNTS derstood that these limitations are purely arbitrary, and apply only to the use of these words and phrases in this book. This is especially true in regard to the terms "gains" and "profits," which are usually synonymous and interchangeable. 1. Contracts. This term is always applied to any kind of lease or agreement providing for the sale of real estate on an instalment plan. 2. Gain; Gain on Sales. These expressions are used to indicate the gross gain on sales, or book profits on transactions, in which the payment of the full purchase price is deferred and the profit has therefore not been fully realized. Such "gains" are not available for dividend-pay- ing purposes until they have become "profits." 3. Profits; Realized Profits; Earned Profits. These terms are used to designate "gains" that have been earned or realized gains that may be carried to the Profit and Loss account as distinguished from those which are some- times called "book profits." 4. Time Sales. In this classification are included all sales which are not paid for in cash or its equivalent sales in which the purchaser is allowed time for the com- pletion of the payment for the property. They are also known as sales "on the instalment plan," "on deferred pay- ments," etc. 5. Subdivision Properties. This term is used to indi- cate such properties as consist of a number of lots or farms, these together forming a whole tract. Such properties are also known as "allotment," "development," "suburban," etc., properties. 6. General Contracts. This classification is intended to include contracts given by the concern on properties other than subdivision properties, which frequently require more detailed accounting than subdivision contracts. DEFINITIONS 3 7. Contracts Payable, This term applies to contracts entered into by the concern for the purchase of property. They are therefore the reverse of the contracts considered under ( i ) on the preceding page. Contracts payable vary in form to meet the circumstances. While they may not carry any obligation to complete the purchase, and may be therefore in the nature of a contingent liability, they differ from the obligation toward the owner under a "selling contract," inasmuch as all payments made by the concern are forfeited if the contract payable is not completed. 8. Selling Contracts. By this term is meant a contract giving the concern the right to sell certain property owned by another, the title, as a rule, not passing through the concern. 9. The Concern. This term is used to designate the proprietor of the accounts under consideration; it may be a corporation, a partnership, or an individual acting either for himself or in a fiduciary capacity. In some cases "the concern" is an owner ; in others, merely a broker or agent ; so, as a matter of convenience, the word "concern" is used to cover all cases. CHAPTER II RECORDS FOR REAL ESTATE 2. Records Required To record properly all transactions arising in connec- tion with real estate, a considerable number of books and forms must be provided. No one concern may need them all, but they are treated here to provide for the varying conditions and requirements of the real estate business. In a large business, such as that of many land develop- ment companies, the books will be numerous, for efficient management requires that the business be regarded from many standpoints. The more important activities of such a concern may be roughly classified as follows : 1. The management of its capital and the recording of all items relating thereto. 2. The collection of income arising from the opera- tions of the business, and the proper entering thereof in the books of account. 3. The proper recording of each piece of property in which the concern has any interest. 4. The recording of all sales, with full details in each case. 5. The keeping of an account with each debtor to and creditor of the concern. 3. Use of Records to Officers It not infrequently happens that there are several of- ficers in a real estate company, and perhaps several com- mittees, each looking at the affairs of the concern from a 4 RECORDS FOR REAL ESTATE 5 different standpoint and requiring different information. This necessitates the keeping of accounts in such detail and yet in such clear form that they may be readily understood by each of the interested parties. Under such circumstances its records must be arranged to fill the following require- ments at all times and on short notice : 1. To keep the manager of the business informed as to its general condition. 2. To inform the treasurer as to his current resources and liabilities, and particularly as to approaching liabilities, such as notes becoming payable, in- surance to be renewed, taxes to be paid, etc. 3. To show the collection department the standing of each debtor. 4. To inform salesmen fully as to all unsold proper- ties. 5. To show on the face of each account in the prop- erty ledger the cost to date of the property to which the account pertains, and to show in their appropriate places the costs of all other securities owned. 4. Loose-Leaf and Card Records Except in the cases of the few general accounts speci- fied below as requiring bound books, the larger part of the real estate records may be most conveniently kept in loose- leaf ledgers or on cards. In some few cases, as for in- stance, insurance records (see 330), the loose-leaf ledger is much to be preferred to cards, for two main reasons: 1. There is less likelihood of loss and confusion when accounts are to be consulted. 2. It requires far less space. Take for example a sub-ledger for a subdivision tract 6 REAL ESTATE ACCOUNTS with 750 customers, to which frequent reference is made by the bookkeepers, by the credit man, and by a number of salesmen. The examination of one of these accounts, if they are kept on cards, usually necessitates the removal of that card from the file, and, unfortunately, these cards are not always returned promptly. It is perhaps kept out for reference, for correction, or for copying; other matters intervene, its return is postponed indefinitely, and the card too often is lost. In the case of a loose-leaf ledger, on the other hand, an account to be consulted is found in the ledger ; a slip may be inserted to mark the sheet, but the account itself never leaves its proper place. Again, who has handled card records in any quantity without seeing at least once a file full of cards dropped or upset, requiring hours, perhaps, to sort out and re- arrange ? As to compactness, the space required for 750 cards is several times greater than that required for the same num- ber of ledger sheets, especially if the latter are of thin paper. A number of such ledgers containing thousands of accounts can be kept in an ordinary safe, while an equal number of cards require a special series of filing cabinets and more vault space than can as a rule be conveniently given. 5. List of Real Estate Records The following list is intended to include the more im- portant books and records required in the many ramifica- tions of the real estate business. The list looks formidable, and in practice no office, save perhaps a few of the largest, would use them all. All are needed, however, somewhere, at some time, to record adequately the numerous and vary- ing transactions of real estate. RECORDS FOR REAL ESTATE 1. Corporate Records: Minute Book Stock Certificate Book Stock Record or Stock Ledger Subscription Ledger 2. General Books of Account : General Receipt Book Cash Book Petty Cash Book Superintendent's Cash Book Journal General Ledger 3. Sub-Ledgers : Mortgages Receivable Ledger Mortgages Payable Ledger General Contracts Ledger Commissions Payable Ledger Brokerage (Commissions Earned) Ledger Subdivision Customers Ledgers 4. Property Records: Report of Real Estate Transactions Property Index Property Ledger, Wild Lands Property Ledger, City Lots Field Record, City Property Field Record, Wild Lands Subdivision Tickler Plat Book Record of Deeds Received Record of Deeds Issued Record of Contracts Issued Record of Options Granted Subdivision History 8 REAL ESTATE ACCOUNTS 5. Rent Records: Record of Leases Given Rent Register (House Address Book) " Receipt Book " Reports " Cash Book " Journal " Ledger 6. Miscellaneous Records : Fire Insurance Record Bills Payable Book Bills Receivable Book Mortgage Interest Receivable Record Mortgage Interest Payable Record Expense Account Analysis Book 6. Separate Books for Each Class of Accounts The idea sometimes prevails with those unfamiliar with accounting that the simplicity of an accounting system may be measured by the number of books employed an idea which is frequently fallacious. The simplest system is the best, if it is adequate ; but speaking generally, nothing could be more mistaken than the idea that simplicity and the number of books employed have any necessary connection. Simplicity is frequently attained by keeping different classes of entries in different books, rather than by enter- ing many varied transactions in one book, a method which necessitates much analysis at a later day. The terms "a few records" and "simple methods" arc not synonymous; they are in fact opposed to each other. "Few records" usually mean poor records, and poor rec- ords not infrequently result in a poor owner of those rec- ords. In the case of a large real estate business with nu- RECORDS FOR REAL ESTATE 9 merous branches and much detail work, a certain complexity is unavoidable. It is a condition common to all affairs that the larger and more involved the business, the more com- prehensive and complex must be its system of records. Also in any business, no matter what its size, a sufficient number of books must be employed to record properly its transactions, and the accountant when installing a system, usually finds that simplicity and clearness are obtained by the use of records sufficient in number to keep each class of entry separate and distinct. 7. Condensed Records Several decades ago there was an unnecessary amount of writing caused by the multiplicity of day-books, the need- less journalizing of every entry, and useless transcriptions from book to book. It was discovered that much of this was duplication, still more was needless, and that much elimination was possible. A reaction set in ; the pendulum swung to the opposite extreme, and all kinds of condensed systems and combinations were devised, copyrighted, and patented, but have in most cases been abandoned. One enterprising retailer whose small business allowed him ample leisure, even devised a single book which was to take the place of journal, cash book, and ledger. It required no balancing, and in fact was a whole accounting system in itself. Most accountants who have audited such a method when applied to a large concern and where carelessness has existed in the bookkeeping, will testify to the troubles in- volved by such attempts at simplicity. It must not be gath- ered from this, however, that columnar books are to be condemned. On the contrary, they are invaluable, but they must be designed and used with judgment. In considering the number of records it must be remem- bered that competent accounting calls for no word and no I0 REAL ESTATE ACCOUNTS figure beyond those actually necessary. Each transaction must be entered, and be entered clearly, but no more time is required to make these entries in a properly designed series of books than to crowd them into a single volume, which, if the business is large, must necessarily assume clumsy proportions. Also, it is obvious that reference to a set of books in which the entries are properly classified and displayed will be easier and much more satisfactory than is possible under the limitations of a single-volume system. CHAPTER III CORPORATE RECORDS 8. Minute Book The minute book is of the first importance among cor- porate records, for it is usually the original and sole record of the proceedings at corporate meetings. It also contains copies of both the charter and the by-laws. These, how- ever, as a rule are only copies and could be replaced ; while the minutes do not appear elsewhere and could not be du- plicated if the minute book were destroyed. In the case of a real estate company the minutes are particularly important, as the business itself is peculiarly fertile in special resolutions and authorizations. For this reason it is perhaps well to insert a word of caution as to the use of loose-leaf minute books. The minute book, and usually the minute book alone, contains the final authori- zation for all important transactions approved by the di- rectors. Considering the probability of changes in the board of directors, and the fact that the minutes are perhaps written by different individuals at different times, and that it may be necessary to refer to them years after they have been made, the wisdom of confiding such important records to loose sheets is obviously doubtful, unless every precau- tion be taken to prevent loss, change, or substitution. The loose-leaf minute book has many attractions. It is convenient; it enables minutes to be typewritten; a du- plicate copy may be made if desired; and it presents a bet- ter appearance than the ordinary book. These advantages, however, do not warrant the use of the book so long as any II I2 REAL ESTATE ACCOUNTS page can easily be removed without detection, and it should not be used unless it is of a style that makes removal or substitution of leaves difficult if not impossible. This end is sometimes attained by the use of a special paper, each page having its proper folio number printed on ; sometimes by numbering and initialing the pages as they are written ; or, still more effectively, by watermarking the page num- bers or some private emblem into the sheets when the paper is made. In the case of the numbered pages, every sheet must be accounted for and substitution or change will be quite as difficult as in a bound book. 9. Stock Certificate Book The form of the stock certificate book and the general design of its certificates vary but little. The matter appear- ing on the body of the certificates is determined by custom or by the statutes of the state in which the corporation is organized. The essential requirements are that each cer- tificate shall show the name of the company, the state in which it is incorporated, the total authorized capital, the name of the owner of the certificate, the number of shares which the certificate represents, the value of each share, the nature of the stock whether common or preferred and the date of issue. The certificate should also provide a blank form of transfer for the owner to use when his stock is to be assigned. The certificates, which are usually in a bound volume, are numbered consecutively and have stubs numbered to correspond. These stubs contain blanks for recording the most important data given on the certificate. The stock certificate book is usually kept by the secre- tary of the corporation. No difficulty is likely to be en- countered in keeping it, provided the necessary entries are made at the time each transaction occurs. It is, however, CORPORATE RECORDS ^ of the greatest importance that no certificate be issued until the essential facts have been entered on its stub. When a certificate is surrendered for reissue, it should be cancelled by perforation, by a rubber stamp, or by some other method equally effective. It should then be pasted back on the stub of the stock certificate book from which it was origin- ally torn, and there should be entered on this stub the num- ber of the certificate issued in lieu thereof, or, if none is issued, the reason for its surrender. These matters appear almost too elementary to dwell upon, and yet a vast amount of labor and trouble may be, and frequently is, caused by the failure of the secretary or bookkeeper to make the proper entries at the proper time. Stock certificates are occasionally printed and kept loose, that is, not attached to any stub or bound in a book. Such a course is unwise and unsafe. 10. Stock Record or Stock Ledger This is really a sub-ledger, in which an account is opened with each stockholder, charging him with certificates is- sued to him and crediting him with those which he has surrendered. (See Form I.) Inasmuch as the stubs in the stock certificate book constitute a bound volume from which entries are made into the stock ledger, the latter rec- ord is not t>ne of original entry. It is therefore safe and entirely proper to use a loose-leaf book for this ledger with- out the precautions necessary in the case of a loose-leaf min- ute book. The loose-leaf stock ledger is usually arranged alphabetically, thereby saving all reference to an index. If the company is a large one, there is considerable advantage in this alphabetical arrangement. In some states the alpha- betical arrangement is required by law. The fact that ac- counts can be removed as they are closed is also an impor- tant feature of the loose-leaf ledger. REAL ESTATE ACCOUNTS CORPORATE RECORDS 15 ii. Subscription Ledger This book is needed only where capital stock is not paid for immediately upon subscription. In it, an account is opened for each subscriber for stock, showing his name and address, the amount of his subscription, and the terms of payment. The subscriber's account is charged with the amount of his subscription, and credited with the payments thereon as they are made. When the subscription is com- pleted the account is closed. Inasmuch as this is merely a sub-record, the entries for which are taken from the jour- nal and the cash book, the loose-leaf ledger is convenient and unobjectionable. The subscription ledger corresponds to the English record known as the "call book," in which is recorded each call made for unpaid capital subscribed. The debit entries to the subscription ledger are posted from the journal, where the entry is usually made in the following form : Subscription Account To Capital Stock Account For the following subscriptions to stock : John Brown, 5 shares, $500, payable James Smith, 10 shares, $1,000, payable The credit entries to the subscription ledger are usually posted from the cash book as payments are made, although occasionally a journal entry is required when some consid- eration other than cash is received for capital stock or when subscriptions are cancelled. CHAPTER IV GENERAL BOOKS OF ACCOUNT 12. General Receipt Book It is essential that every item of cash received should be immediately entered on the records, and the best method of accomplishing this is to use a receipt book in which the receipts are numbered consecutively in duplicate, the sec- ond copy being made out at the same time as the original by means of carbon paper. There can be no doubt that the carbon duplicate in such book is far better than the re- ceipt stub. Not only does it save time but it gives an ab- solute duplication of the receipt delivered to the party mak- ing the payment. The original of each receipt in the general receipt book is perforated so that on being made out it can be torn from the book and given to the payer, the duplicate (preferably on colored paper) remaining in the book. The receipt book then forms the book of original entry, on which all sub- sequent entries relating to cash received are based. This book takes the place of a cash "blotter" or counter book for receipts, and in the temporary absence of the regular cashier provides his substitute with a convenient and reliable means of accounting for all money he may receive. It is a good rule, and in large offices an essential one, that all receipt books shall be kept by the cashier or other responsible officer under lock and key, and that new books be issued to collectors and others only as the old books are returned. A written record should be kept of the date of issue of each book and the name of the person receiving it. 16 GENERAL BOOKS OF ACCOUNT 17 It is convenient to paste on the back of each book its num- ber, and the first and last dates of all the receipts it con- tains. The used receipt books must be filed with care, for in the event of a controversy over any payment they are, as books of original entry, of even more value than the cash book itself. THE ALPHA LAND COMPANY NOCATEE, GEORGIA No. 72457 Received of Address The sum of ON ACCOUNT OF Mortgage No ............. Principal .................... $ Interest ..................... $ Contract No ........................................... $ Eureka Gardens ....................................... $ Fairmount ............................................ $ Grandville ............................................ $ Kingslake ........................................ .... $ Ladore ............................................... $ $ THE ALPHA LAND COMPANY, By (This receipt made in duplicate) Form 2. General Receipt Book x g REAL ESTATE ACCOUNTS The form of receipt book shown in Form 2 has been in actual use for a number of years and meets every gen- eral requirement. Receipts for rents are given on a dif- ferent form. Speaking generally, every penny of cash received should be accounted for on a receipt. In practice there arise a few exceptions to this rule, as for instance, proceeds of dis- counted notes, proceeds of bills payable and of mortgages and bonds sold. Even in such cases it is, when possible, usually advisable to fill out a receipt showing the details, although the original receipt is not necessarily delivered to the person from whom the money is received. 13. Cash Book In modern practice it is customary to speak of the cash book as distinct from the journal, and this naturally leads those unfamiliar with bookkeeping to think that some radi- cal difference exists between the two books. This, however, is not the case, for a cash book is neither more nor less than a special form of journal devoted to cash entries, and might, therefore, properly be called a cash journal, just as a journal devoted to sales entries is called a sales journal. In practice, the term "Cash Journal" is usually re- stricted to the columnar form of cash book, an example of which is shown in Form 3. The use of this name has caused some confusion and has sometimes been made an excuse for bringing into this record items which do not refer to cash. Considered in the light of accounting history, this practice is a step backward rather than forward. Our fore- fathers brought the record of all their transactions into one book a journal, i.e., a "day-book" from which they posted to the ledger; but after years, centuries in fact, it was found advantageous to eliminate cash items from the journal and record them in a cash book. This idea has GENERAL BOOKS OF ACCOUNT { JUMVCMM-Ot * 1,* 22 1 W 7 &fa2S ffldfUnflvr * 5 no 10 L , J 3/lACLCcUX 7.0 no fo Si jSfx^ot -CoU- a 00 *7 00 (hduv&iaitMCf Is or- }' t - 2/w3/ DATE ITEM rcuo AMOUNT CATC ITEM raw AMOUNT COMMISSION RAID ,. ~~" . _ Form 12. Commissions Payable Ledger 22. Brokerage (Commissions Earned) Ledger The brokerage ledger is used for the purpose of record- ing all the transactions which yield a brokerage or a com- mission. (See Chapter XXX.) The record is a simple one and may be of the style shown in Form 13. The profits arising from commissions on the sale of real estate are unusually simple. In the great majority of cases they are paid in cash or its equivalent as soon as a sale is completed, and are entered directly in the cash book or journal, as the case may be. In the matter of commissions on time sales, especially where the payments are small, it is a common custom for the owner to make some particular arrangement with the agent, such as agreeing to pay him, say, 50% of all collections until the commission is fully paid. SUB-LEDGERS Z SHEET NQ NAME ADDRESS. ACCOUNT na DATE ITEMS rocytC&W tWvWOXKW Jffo DEBITS tlooo ITEMS in J CREDITS 1&QSLOQ - Form 13. Brokerage (Commissions Earned) Ledger 23. Subdivision Customers Ledgers These sub-ledgers (Forms 14, 15, 16) contain accounts with individual purchasers of lots included in subdivisions handled by the concern ( 173, 174). If the concern buys a house, and then sells that house on contract, the account with the purchaser would be entered in the general con- tracts ledger (Form n) ; but if the concern bought 1,000 acres of land and divided it into 500 tracts, the accounts with the various customers for each of these tracts would be kept in one of these subdivision customers ledgers, one such ledger being devoted to each subdivision. Inasmuch as these accounts are of a somewhat tempo- rary nature, frequently lasting not more than two or three years, it is not necessary to use so substantial a book as REAL ESTATE ACCOUNTS NAME ADDC ' CCOUNT NC WEET NO._ 1 =SS ? NT DATE IDM ra. DEBHS CREDTTS BALANCE DATE rrtu TX. DEBITS CREDfTS BALANCE ~*~~~ _^~\_ pj Form 14. Subdivision Customers Ledger has been indicated for the preceding ledgers. Form 15, discussed in 174, shows an improved method for keeping these accounts. In some cases it is possible to use a tabular form of ledger not unlike the "Boston" ledger so largely used in banks. This form is well adapted to a comparatively small subdivision in which all the lots are disposed of by contract in a short time. In such a case each lot is entered in order of date on one line, or the names of the purchasers are en- tered in alphabetical order, an index being provided in the former case to show the name of each customer and the number of his contract. Form 16 shows the proper ruling. By the use of "short leaves," a record of this kind ex- tending over three or four years can be kept in a book of convenient size. The chief advantage of this form lies in SUB-LEDGERS 43 o NAM! STRE CITY. j TERMS LOT OB TPA/T T E 1 1LOCK lECTION prvovr IWE DC. CO. BALANCE RESERVE RESERVE REAUZED Form 15. Subdivision Customers Ledger the fact that it dispenses with the necessity of drawing off a trial balance of the sub-ledger, as a total of the "Balance" column gives this at once. If any error has been made it can be quickly detected, for the total of the receipt column for any month must agree with the total of the correspond- ing column in the cash book plus any journal entries which may have been made. Whatever the form of record used for these subdivision accounts, a fixed rule should always govern where contracts are transferred a proceeding of frequent occurrence. In some offices it is the practice to write the name of the trans- feree on the existing ledger sheet, and then transfer this sheet to its location in alphabetical order; e.g., if a lot is bought by John Doe and an account opened with him, and this lot is sold to Richard Roe, the latter's name is written over Doe's, and the sheet transferred and placed under the 44 REAL ESTATE ACCOUNTS PRICE REOl RECD. rca BALANCE 52- joo Form 16. Tabular Ledger for Subdivision Accounts R's. This method leads to confusion, for the sale is re- ferred to sometimes under one name and sometimes under the other ; or the tickler and other records may fail to show the transfer. The best method is to close John Doe's ac- count by the entry (preferably in red ink) "Balance trans- ferred from John Doe to Richard Roe." In this way it is always easy to trace the history of any lot, even if the tickler is deficient. The accountant should allow no month to pass without taking off a trial balance from each and every sub-ledger, even if it is only an adding machine list ; and in all cases these lists should be filed with the month's papers for future reference. CHAPTER VI PROPERTY RECORDS 24. Report of Real Estate Transactions To record the technical details of real estate transactions in a proper manner, the bookkeeper must be furnished with complete data, and this can best be accomplished by the use of special forms. Form 17 will suggest the lines to be followed, the salesman's report shown giving the facts of each sale. A slight modification of the sales form will adapt it for a report of purchases. After these facts are recorded by the bookkeeper, the reports should be per- manently filed for reference in case any question arises in the future as to the details of a transaction. The use of some such adequate form of report cannot be emphasized too strongly, for otherwise the records will often show blank spaces where information should be found. In other words, it is impossible to maintain a complete set of real estate records without a sure and uniform founda- tion as to purchases and sales, such as is afforded by this form of report. The certificate of title shown in Form 18 is the result of a good many years' experience and may be taken as a general indication of what is desired, the chief object being to set forth clearly and briefly the main facts, instead of leaving them to be "dug out" of an opinion of title occupy- ing perhaps many pages of typewriting. 25. Property Index The purpose of this index is to enable the bookkeeper to turn to the records of any piece of property though only 45 46 REAL ESTATE ACCOUNTS THE ALPHA LAND COMPANY JACKSONVILLE, FLA. REPORT OF PROPOSED SALE No I have this day arranged to sell to ................................ of the following described property owned by Lot Block Subdivision on which there is situated The total purchase price is .............................. $ Payable as follows : Cash .................. $ .......... Contract, payable $ ......... monthly ........ $ .......... First payment due .......................... Mortgage, payable .......................... $ .......... He is also to assume mortgage, viz : ........................ $ .......... Making the total price of $ Interest is to be payable at the rate of per cent. Commission of $ payable to IMPROVEMENTS: The company agrees to erect for the purchaser a which is estimated to cost $ , which is to be added to the above figures and is to be covered by the above payments. Salesman Papers drawn: Entered, Property No. Mtge. Payable No. Contract No. Book tickler Mtge. Receiv. No. Plat Approved Form 17. Report of Sale PROPERTY RECORDS 47 Opinion No Application No Loan No UNITED STATES TRUST & SAVINGS BANK, Jacksonville, Fla. 191 Gentlemen : I hereby certify that I have examined the title to the following described property, lying County, viz. : as set forth in the following abstracts, viz. : No made by Dated (Leave blanks here for further abstracts.) Based upon these abstracts, my opinion as to the title to said property is as follows : 1. The Fee Simple title was on the day of 191 .. vested in Subject to the following encumbrancees : 2. Mortgages See entries Nos Abstracts Nos 3. Taxes, State and County 4. Taxes, Municipal 5. Other liens and judgments See entries Nos Abstracts Nos 6. If the encumbrances noted above be cleared from the title by the following action 7. In my opinion a promissory note, secured by a mortgage executed by would, when duly recorded, constitute a first lien on said property. Attorney-at-Law Remarks : Form 18. Certificate of Title REAL ESTATE ACCOUNTS the name of the vendor is known, and furnish a list of all real estate acquired. It is convenient to number each piece of property consecutively as it is acquired, and to give it some descriptive title, as the "J ones Property," the "Carsley Hill Property," or the name of a subdivision of a larger property, as "Lake Side." In any case, the name or names NO DESCBIPTION A B C D E F G H 1 J K L M N 1 . 2. 4Wf CLcLU. 6^ ^L ird ^' ( (3. 2 0. 20, J&opts ddd^. ^ fe fc \ 3 fiat-Mi. (J^tt^l, )tta/> % idt> ucvfc >,'5 P ff < --, Form 79. Property Index selected are entered on the property index in the column headed with the initial letter of that name, as indicated in Form 19. Each piece of property should be entered im- mediately on receipt of the deed. Such an index enables any employee, whether familiar with the books of account or not, to refer promptly to any particular property. 26. Property Ledger Wild Lands The property ledger is the most technical and distinc- tive of the entire series of real estate records, and one of PROPERTY RECORDS 49 Width Column Purpose of Column Inches 1 For description (By metes and bounds or by forties) 6 7/8 2 Section 7/l6 3 Township 7/16 4 Range 7/16 5] ("Deed No 1/2 6 Whence P ate of Deed 3 / 4 I Derived Grantor ;" ~" * *A \\ [Recordedl^.... ..................... 1/2 10 Abstract No 1 1/16 11 f Instrument 3/4 12 r> :^,, From .. . i 1/2 == 16 1 f Valuers i 17 [ Value Date 3/4 i8J [Amount I 19 Cost i 20 1 f Nature i 21 \ Encumbrances Mortgage No 1/2 22 J [ Amount I 23] [Year 1/2 24 State and Valuation I 25 County Amount of Taxes I 26 Taxes Date Paid 3/4 27 J [ Receipt No 5/8 28] [Date 3/4 29 \ Charges Purpose I 5/8 30 J [ Amount I 3i] [Date 3/4 32 I- Disposition To i 1/2 33 J [ Sales Record 3/4 34 Remarks 6 Form 20. Property Record or Tract Book (table showing the nature and width of columns) the most important. It records all the details of every piece of property in which the concern is interested. In other lines of business there is no record with which the property ledger may compare, unless perhaps a perpetual inventory; but real estate is a less liquid asset than mer- chandise, and the items of a property ledger have a value REAL ESTATE ACCOUNTS PROPERTY RECORDS t 52 REAL ESTATE ACCOUNTS far more permanent than the items of a mercantile inven- tory. Particulars regarding merchandise can usually be gathered from filed invoices, whereas the corresponding information regarding real estate is more varied and tech- nical, and is more difficult to obtain as it must be drawn from a variety of records. The property ledger will be found equally useful in other lines of business when large tracts of land are held. Owing to the many purposes which a property ledger serves, it is difficult to devise a single form which will in all cases yield the best results. Several forms are therefore given, which, besides meeting the requirements of the special cases for which they were designed, will suggest forms suitable under other conditions. The problem is to provide a record which is convenient for reference and which ex- hibits clearly all the essential facts. Forms 20 and 21 illustrate respectively the bound vol- ume and the loose-leaf book. Experience has demonstrated the great superiority of the loose-leaf form. It is more con- venient in size, and provides for indefinite expansion by the insertion of additional leaves wherever they may be re- quired. On account of this elasticity it has nearly displaced the bound book. Form 20, the bound volume, can be used to best ad- vantage in cases where no new land is to be acquired, i.e., where the concern can at once make up complete and final lists. The following remarks apply equally to Forms 20 and 21. The first step in writing up a property ledger is to select the unit, and as there is no uniform method of sur- veying which has been adopted throughout the entire United States, it is impossible to give forms applicable everywhere. The examples which follow are based on a United States township as being the most generally used. PROPERTY RECORDS 53 In making the entries, the data should always be taken direct from original deeds and not from transcripts or mem- oranda. Every time a description is copied the probability of error is multiplied, and for this reason the record should always be made directly from deed to ledger. For convenience in making up tax lists and tax returns, it is best first to arrange the lands by counties, as it is usually the county which assesses and collects the taxes. Having done this, let it be assumed that the unit within the county is the township. This unit is six miles square, and is ordinarily divided into 36 sections, numbered from i to 36, although it frequently happens that, owing to old grants or other similar causes, townships are irregular. In such instances the irregular sections are usually indicated by numbers from 37 upwards. As a rule, all the lands owned in any one section should be entered on the same sheet of the property ledger, although in some cases a finer sub- division may be made with advantage, as for instance, where different lands in the same section are derived from different sources. The sheets of the property ledger should then be ar- ranged in regular order, either of township or of range, some offices preferring one order and some the other. By the order of township is meant the following arrangement : Section I Township i Range I I i i "2 1 "2 2 " i 2 "2 The regular section consists of 640 acres, divided into quarter sections and described as N.E. *4 e tc., each of which is again subdivided into 4O-acre tracts, described as N.E. *4 f N.E. ^4, etc. When a whole section, or 54 REAL ESTATE ACCOUNTS s "2 5 h 9 PROPERTY RECORDS 55 P UJ ft | | S sn REAL ESTATE ACCOUNTS t3 Q S E o rt rt i ' C K rt > C O g *^ "S tl 3 3 bfl r* -*^ ^ *^ J3 ii 5^2^ !"! cj w ^ &.!! S o o -o w 6 o u I'S s ^ s-o *4 Q rt j^ O S C G "Ji rt S * j* O C^ rt C J3 ^ -: o bO ja -2 'JJ g -5 ? ."Si 9L g co .2 -o O "ti CQ S *^ c u g rt "' Q .2 ^ > 15 .. I A *o i? * > c c o o !> UU 5? M W O H Q e o o m -p *1 C C KT &J-i * ^M S 2 J3 5 00 W to of ^ u Q o G bfi C P ID 3 P "> > c c 00 U U w u- n o .So PROPERTY RECORDS 57 any portion consisting of more than 40 acres, is written on the property ledger sheet, the tract should be broken up into these forties, and the exact acreage be shown. It will be seen in the timber land record shown in Form 22 that 1 6 lines are provided, one for each "forty" in a section, so that if this plan is followed, the disposition of any forty may be shown without disturbing or rewriting the descrip- tions for the rest of the section. It will frequently occur that descriptions of small tracts in irregular sections are so complex that it is advisable to enter each one on a sep- arate sheet as in Form 23. It is sometimes required to form a bound-book record from a mass of deeds covering contiguous lands. In such cases it is convenient to use the listing slip shown in Form 24 for the description of the property. These slips measure 5^2 X ii inches, and when printed can be put up in pads. They are written up, one for each deeded piece of land, ar- ranged in order, and copied into the book, the entries being checked against the original deeds. The property record outlined in Form 20 is one used in an office which controls large tracts of land of varied char- acter and widely distributed. It is a bound book and its data was compiled by the use of the land list shown in Form 23, and, as no further lands were acquired, the bound-book form has not been found inconvenient, though the entries relating to taxes have overflowed the space allotted to them. The sheets used in this record are 21 inches wide and i7 l /2 inches deep, making a book 42 inches wide when open, the record running entirely across the folios. The books from which these dimensions are taken form a series in which were recorded lands in some thirty different counties. Each page is headed with the name of the county in which the land lies. The horizontal ruling is in faint blue with five lines to the inch, every ninth line being ruled in REAL ESTATE ACCOUNTS PROPERTY RECORDS 59 heavy purple ; no more than one section of land is entered in the space between the purple lines. Columns 5 to 9 are frequently of great use in showing the source from which the particular land came a fact it is often convenient to have at hand. Columns n to 14 are required in cases where it is convenient to show those through whom title has passed. This information is es- pecially useful in some states where land is held under tax titles of more or less uncertain value. If these columns are omitted, a double set of "Taxes" columns may be in- serted. The property ledger shown in Form 21 was devised for a land company owning wild lands and city property, and is practicable for both classes. The size of the sheet is shown as 9)4 X nj4 inches, although many prefer n X 12 inches. The blank heading is of sufficient size to allow an ordinary description to be given at length. The back of the sheet provides for a record of taxes paid and expenses incurred. The timber land record shown in Form 22 was arranged for an estate consisting of pine lands, the title of which rested in sundry individuals. It provides for the following special points : 1. Plats of the lands described, this information being permitted by the large headings. 2. Particulars as to turpentine and logging, etc. 3. The record of the tax assessor's description in the tax statement on the reverse side of the sheet. As a considerable part of these lands lay in large grants, the descriptions being by metes and bounds, the tax as- sessor's description was merely the book and page on which was recorded the deed conveying the particular piece tc be taxed. Until this information was entered on the prop- 60 REAL ESTATE ACCOUNTS erty record, there was constant difficulty in assigning to the particular property any item of taxes paid. This form was used in connection with the land list shown in Form 23, and as the lands were being continually used for grazing, logging, and turpentine, it proved very satisfactory. Whatever form of property record is adopted, great care must be taken to insure the entry of all particulars of a general nature, such as quality of soil, timber, minerals, etc. ; also all options, leases, or privileges of any kind which may have been granted, as well as the receipt of any con- sideration therefor, either on the Principal account or on the memorandum income account. As will be noted, apart from its other uses the property ledger forms a perpetual inventory of what is practically the "merchandise" of a real estate concern. One of the features of real estate accounting is the comparative ease with which an absolutely correct record of everything "on hand" can be maintained. All the property records shown here provide for the entry of details regarding taxes as well as of land descrip- tions. Thus the value of such a record increases with its age. The forms must necessarily be modified to meet local conditions. (See Chapter XXXV.) It is important to have such a complete record, but this fact is frequently overlooked. 27. Property Ledger, City Properties It is beyond question that the most convenient form for the record of city properties is a loose-leaf book. As al- ready stated, the property ledger shown in Form 21 is suitable for this purpose, as is also the city property ledger shown in Form 25. The latter form provides for the entry of all essential information and is almost self-explanatory. PROPERTY RECORDS 6l Particulars as to appraisals and selling price may be entered in the "Remarks" division, while expense and receipts may be put on the back as memoranda. The most convenient method of arranging this ledger is to keep together all sheets relating to the same subdi- vision, arranging them in alphabetical or geographical or- der as may be desired, and separating them by blank sheets of heavy paper, to each of which is attached a movable in- dex tag giving the name of the plat referred to on the sheets following. This method gives immediate access to the records of any piece of property of which the descrip- tion is known. If the name of the vendor is known, refer- ence to the property index (Form 19) will give the subdi- vision ; while, if only the street address is known, the prop- erty can be located by means of the rent record given in Form 32 ( 37). Such an arrangement assists an auditor materially, as it insures against the duplicate entry of any piece of prop- erty and provides for the entry of all mortgages on any property in one place matters which could not be de- termined under any other arrangement without much search. To illustrate, let us suppose that a piece of property is described in several ways, such as "part of lot," or "north ^2 of lot," or by metes and bounds. Quitclaim deeds to the property may be obtained, in each of which a different form of description is used. If the property ledger is arranged in the order of the dates of deeds, or in alphabetical order by the names of grantees, separate mortgages might be en- tered under the several descriptions, and one or more might escape even a careful checking. When writing up the property ledger sheet for any im- proved property, care should be taken to enter separately the. value of the land and the value of the improvements, 62 REAL ESTATE ACCOUNTS PROPERTY RECORDS ( 5 I j I ) UJ It k it " I *! "K B u I -~s >-c> UJ