How to record earnest money?

Setup & Support
#1

Hi,
I’m new to the Stessa website. I am trying to record my earnest money payment, but doesn’t know what category to use.

According to this post: Understanding the categories, closing costs, loan costs , it seems that I should use “Capital Expense → Closing Costs”.

But when I choose this, it doesn’t show up in the balance sheet (I expect it to be in my balance sheet → asset). I also tried “Transfers > Down Payments”, but it’s the same, it doesn’t show up as my asset in the balance sheet.

So what’s the correct way to categorize this transaction? Thanks.

#2

@jian01.xu “Transfers > Down Payments” is probably where you want to categorize earnest money. It’s not an asset or an expense, it’s part of the purchase/acquisition. The asset here is the property, which is typically then valued and reported on the Balance Sheet at its current market value.

The full purchase price should be set up separately under Property Details. The price you paid then drives your cost basis, which is not yet supported on Stessa in much detail.

“Capital Expenses > Closing Costs” should be reserved for only items associated with the purchase that are capitalized over the useful life of the asset, not expensed in the year incurred.

As always, please consult your CPA as we are not qualified to give official tax advice.

#3

Thanks Devin. Glad to know that the balance sheet uses market value. I thought it tracks book value instead. So if the EM are split into several pieces over months, how do I keep track with how much I have paid, and how much is left?

Another question, there’s another house that I purchased by 100% cash. Should I put all these into “Transfers > Down Payments”? And in order for it to show up in my balance sheet, I guess I have to put the same amount in “market value”?

Jian