Land and Speculative Developments

A Suggested approach for handling these activities:

Land Development - Subdivisions

Requirements:

- a Job for each development with the Builder/Company as the Client/Debtor

- a Cost Centre Bank with just a "Sundry Income" account nominated for the default Income A/C, as this is not actually used for posting, and a default GL cost account of an Asset, e.g. "Land Development - Subdivisions at Cost"

- typical Cost Centres may include:

       MAR                Marketing

       COUN                Council Fees

       DES                Design

       ENG                Engineer

       SUR                Surveying

       SOIL                Soil Testing

       ROAD                Road Construction

these would be linked to the development asset, plus there may be some cost centres linked to GL Expense accounts if appropriate, e.g. legal; interest; etc.

Land Lot - Sales

Requirements:

- a Job per land lot and an associated Client/Debtor

- a Cost Centre Bank with a default Income account, e.g. "Land Sales" and default GL cost account of a Cost of Sales category, e.g. "Land Lots Cost"

- typical Cost Centres would be: Lot Cost (Development); Legal; Rates; Commission; etc.

- a journal to transfer the per lot development cost to the Land Lot - Sales job

               Debit                Land Lot - Sales Job; Lot Cost cost centre

               Credit                Land Development asset

- record any other costs using invoice and journal posting

- record the sale or contractual progress claims as for other contractual style jobs and their subsequent receipts

Spec Home Construction (including Display or Exhibition Homes)

Requirements:

- a Job per Spec Home with the Builder/Company as the Client/Debtor

- a Cost Centre Bank with "Sundry Income" as the default income account as there is no client at this stage;  default GL Cost account would be an Asset, e.g. "Spec Homes Complete and Under Construction"

- typical cost centres are as for normal Home building plus a Land cost

- optionally a journal is used to transfer the per lot development cost to the Spec job or this could be held until the package sale is made (refer to next section re sale)

               Debit                Spec Job; Land Cost cost centre

               Credit                Land Development asset

n.b. if land is purchased from an outside party then it would be an invoice and payment

to record the cost in-lieu-of the journal

Spec Home Sales

Requirements where a package is sold:

- a Job per Spec Sale and a Client/Debtor

- a Cost Centre Bank for "Spec Home Sales" with default income account, e.g. "Spec Homes" and default GL cost account in Cost of Sales category, e.g. "Spec Homes"

- cost centres of: Spec Home Cost; Outgoings-Legal, etc.; Commission

- a journal to transfer the Spec Home and Land cost to the Spec Home Sales job

               Debit                Spec Home Sales Job; Spec Home Cost cost centre

               Credit                Spec Homes asset

               Credit                Land Development - Subdivisions

n.b. if land is being subdivided and is then available for a package sale, then the development cost of the specific lot may be transferred (by journal) to the Spec Home Sales job or the cost may already have been transferred at the pre-sale stage as described in the previous section (Spec Home Construction).