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Wednesday, December 07, 2011

Cashflow vs Profit & Loss

I've had a recent enquiry from one landlord using our property management software who wanted to do a profit and loss account for each property.

I emailed to explain that our software doesn't do this. There is a reason.

Commercial property companies do have to prepare annual accounts and part of this is their profit and loss statement. As we all know any property business involves two aspects. The revenue and capital. The former relates to the net outcome of revenue and outgoings and is generally reflected by the cashflow. The latter relates to the capital value of the property investment. As most residential landlords are only concerned with this aspect of their property investment when they sell or possibly remortgage their property we have not put a great deal of store on a profit or loss feature. Should we have done?

The other reason is that for tax purposes the HMRC view the entire property portfolio as a landords letting business and don't concern themselves with separate rental units.

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