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Accounting Services for Real Estate Sectors/Companies

Real estate deals with property management and it is one of the rapidly growing businesses in Dubai. The RERA (Real Estate Regulatory Authority) of UAE deals with all the legal considerations associated with it. For a Real Estate Company, there are a lot of areas to focus on including the construction and property aspects. Accounting & bookkeeping tasks can be very tedious because of the large number of regulations by concerned authorities and huge volumes of transactions. Therefore, accounting for real estate companies needs to be done in a more organized way. The Dubai Land Department (DLD) has announced a huge growth in land transaction rates which points to the enormous growth of the real estate sector. From an accounting perspective, it must ensure a standard process to collect financial information is to be implemented for smooth functioning. Choosing the right accounting method and consistent filing & tracking system will help to create a well-defined database. The intended users of real estate accounting include:


* Real estate agency consultants

* Outsourced accountants to Real estate clients

* Owner of building construction firm

* Accounting and tax consultancy firms

* Investor and manager of residential sales

IFRS 15 and Real Estate Industry

IFRS 15 provides a five-step model before introducing the accounting services for a real estate company:

  • Identify the Contract: Understand the scope of the contract and various clauses associated with it.
  • Identify the performance obligations in the Contract: Activities mentioned in the contract must be denoted to separate performance obligations.
  • Determine the Transaction Price: Transaction price for each service activity to be clearly mentioned.
  • Allocate the Transaction Price to Separate Performance Obligations: segmentation of services and allocating price to each segment.
  • Recognize the Revenue Generated: Revenue earned on completed obligations must be clearly mentioned in reports.

Choose an accounting method

You have to choose between two accounting methods to complete the bookkeeping - Cash basis or Accrual basis. These two methods use slightly different principles for recording the transaction. Cash basis accounting is a simple method to track transactions. You will make one entry every time physical cash is being transacted. Record it as income when you receive cash (example- someone pays you a security deposit) and expenses when you are paying the cash (example- you are giving payment to the supplier for repair works) Accrual accounting is a little bit more difficult than a cash basis. You will have to record at least two entries for every transaction. Record income when you are incurring it (example- you send an invoice to the tenant) and expenses when you incur them (example- you receive an invoice from the supplier).

Set up Chart of Accounts

You need to prepare a chart of accounts to record and organize your accounting journal entries. A chart of accounts will list every real estate transaction you are making. When setting up your chart of accounts, you must ensure to create different categories or accounts for different transactions. For example - you will have accounts called “Repairs and Maintenance,” “Insurance for buildings,” “Electricity charges,” and “Advertising Expenses”

How CDA helps you?

CDA team consists of professionals who have decades of experience in Dubai-based accounting & auditing tasks and in-depth knowledge in Accounting our services in the real estate companies includes:

Tenant Management

Setting up of leasing related information into accounting software comprising the following activities:

  • Setting up billing criteria like rent and other charges
  • Generation of Rental Income statement
  • Monthly rent collection processing
  • Updating tenant Ledger for Check-Ins, Check-Outs and Expiry
  • Checking utility consumption and comparing with previous periods
  • Analysing tenant ledger report to identify discrepancies if any
  • Generating reports such as Late Fees, Check-In, Check-Outs, Termination or Expiry

Accounts Payable Management

Entering accounts payable invoice into accounting software with an allocation of expenses to the different property include:

  • Tracking expenses at multi-level projects, entities, buildings and tenants
  • Handling overhead expenses related bills such as utility
  • Tracking of receipts of utility bill for a different property
  • Allocation of expenses across different entity or property
  • Checking utility bill outstanding during Check-in and Check-out
  • Handling insurance-related expenses

Accounts Receivable Management

Handling the receipts from the clients and recording them in the system include:

  • Tracking of security deposits of the different tenants.
  • Handling check-in, check-out, renewal and expiry of the lease agreement.
  • Process and analyse monthly rent and prepare invoices and tenant accounts
  • Bill property for management fees and other charges from operating entities
  • Generate Security deposit and Account receivables reports

Reconciliation

  • Reconcile cash to the general ledger
  • Bank reconciliation
  • Reconcile intercompany transaction
  • Supplier account reconciliation
  • Book month-end accrual entries (insurance, real-estate tax, o/s payables)
  • Review general ledger accounts and make corrections that are required
  • Prepare cash projections considering the previous records

Management Reporting

  • Prepare property wise income reports
  • Maintain financial schedules like depreciation, amortization as per company’s requirement
  • Comparing operating results to budget and preparing variances reports.
  • Tenant Information: Rent Income Report, Lease expiration Report, Insurance expiration, Security Deposit Report
  • Financial Statements: Income Statements, Balance Sheet, Property Income Variance Reports, Financial Projections

Business Advisory Services

Business advisory services emphasize on making strategies for the success and growth of a business. The advisors are a collection of business coaches, mentors and accountants. Services include:

  • Comparative study on the previous trends and combine them with forecasts
  • The whole picture of the clients’ businesses is analysed and introduce strategies to improve the functioning

Internal and External Audit Services

CDA team recognises that an effective internal audit service can make a very positive contribution to the management in handling risk and the smooth operation of the business. Independent examination of the validity of the company’s financial records.

CFO Services

As a part of accounting services, it is necessary to analyse the process of manufacturing to maintain efficiency and productivity in functioning.

VAT Consultancy Services

Tax payment is compulsory for any business in UAE as this revenue is used for the development of the country. A single fault in the accounting process may lead to a heavy business loss. So, individuals or companies must be extra vigilant while preparing a Tax Account. CDA provides:

  • Advice on Tax Accounting
  • Tax filings
  • Preparation of balance sheets on the basis of tax 
  • Preparation of tax validation projects
  • Deals with tax risk

CDA Services

CDA offers quality accounting services for real estate companies in Dubai and UAE. CDA team has wide experience in the real estate industry. Our qualified & dedicated professionals with an innovative and commercial approach to meet today's highly challenging business environment always proved CDAs expertise in this industry. Our services include Bookkeeping & Accounting, VAT Consultancy, CFO Services, Management Accounting and Internal Audit.

Frequently Asked Questions [FAQ]

1. What are the modes in obtaining control of real estate?

The modes in obtaining control of the real estate

  • Direct acquisition
  • construction
  • leasing of real estate, under either operating or finance leases

2. Do the UAE Nationals need to keep Accounting records or not?

Yes, The UAE national needs to maintain the accounting record for five years at least for VAT Purpose.

3. What is the treatment for a license fee?

The fee income is part of the negotiated cost for the redevelopment of the property. The income should be recognised as a deduction from the cost for the redevelopment of the property.

4. What are the accounting records required by a company?

As prescribed in the Commercial Companies Law and the Commercial Transactions Law businesses must maintain a daily journal and general ledgers according to their specific business requirements. The Commercial Companies Law made it mandatory that all businesses must maintain an original copy of all correspondences, letters and invoices issued or received. All evidencing documents are to be retained for a period of five years.

5. How skilled your team is?

CDA experts are professionally qualified with ACCA and CMA certifications for providing services. Our tax experts can provide excellent consultancy services on your tax filings.

6. What is the pricing structure for your accounting service?

Our prices are in competitive nature, we charge 50% advance payment for all our services. Our monthly rates are based on the following factors:

  • Accounting software used
  • Company type
  • Contract term
  • Skill, experience and frequency of visits 

7. What accounting system do you use for Real estate companies?

Our Accounting systems are based on the latest software available. Depending on customers preferences and needs we work with other systems too.

8. Is there any software which can be used for Tracking PDC and operation of Real Estate?

Yes, customised software’s are available to track PDC and operations of real estate.


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