As the calendar year changes, you may wonder whether there is a specific requirement or process to close out the year in the REI Hub system. No action is required for sole proprietorships and pass-through LLCs. Partnerships should journal the prior year's net income to partner equity accounts.
If you have completed bookkeeping for the previous year and want to ensure that no further transaction entries are made for last year, you can optionally set or update the 'Bookkeeping Close Date' field in the Portfolio Settings page. This will block journal entries (transactions) from being made before the selected date and ensure that your books are not altered after they are completed. Setting a bookkeeping close date is not a requirement and has no impact on your reporting.
For people who own rental property in their name or a pass-through LLC, there is no need to close out revenue or expense accounts or your net income from one year to the next. All of REI Hub's reporting is based on pulling information for date ranges — so pulling a P&L statement for this year will never include revenue or expense information from last year.
The REI Hub balance sheet automatically includes net income from the previous period in your retained earnings account. Owner Funds is the default retained earnings account, or you can select a different one from 'Portfolio Settings' in the right-hand menu. If an account has not been set, the prior period's Retained Earnings will show as a separate balance sheet line; if one has been selected, the prior period's Retained earnings will be added toward the selected account.
If your rentals are owned in a partnership or multi-member LLC taxed as a partnership, the previous year's net income may be journaled to the individual partner's equity accounts. Your tax preparer or financial professional can assist with determining the appropriate values or may wish to handle this on your behalf.
This can be entered in the REI Hub system with either a 'Transfer Between Accounts' or 'Manual Journal' transaction. Select January 1st for the transaction date.
If the prior year's net income was positive:
Transfer Between Accounts: Select the retained earnings account (typically Owner Funds) as the 'Transferred From' account and the partner equity account as the 'Transferred To' account.
Manual Journal: Debit the retained earnings account (typically Owner Funds). Credit the partner equity account.
If the prior year's net income was negative:
Transfer Between Accounts: Select the partner equity account as the 'Transferred From' account and the retained earnings account as the 'Transferred To' account.
Manual Journal: Debit the partner equity account. Credit the retained earnings account.
Still have questions? Reach out to our Support Team via email at [email protected] or call us at (888)939-6865.