What is a P&L?
A Profit & Loss Statement or P&L summarizes the revenues and expenses incurred during a specific time period. This report helps you understand the main profit drivers for your rental business.
How do I generate a P&L in Azibo?
Azibo enables rental property owners to automatically generate a complete, up-to-date P&L for individual properties, portfolios, or all properties over a specific time period. Simply follow these steps:
- Import all rental business transactions automatically by linking the relevant bank or credit card accounts.
- Assign each transaction to a unit and property.
- Use our bulk editor, transaction splitting, and other helpful tools to tag each transaction as a specific income or expense category.
- Go to Reports and click P&L Statement. Select the properties and the time period for the report to see the live results.
Is the Azibo P&L on a cash or accrual basis?
Azibo uses a cash-basis accounting method, which is popular among independent rental property owners and real estate CPAs. Cash-basis accounting means that income or expenses are booked at the time cash enters or exits the business, regardless of when that transaction was invoiced or due. This is the simpler method of accounting compared to accrual accounting, where transactions are booked when the revenue is earned and when the expense is incurred.
Cash-basis accounting helps property owners track actual cash flow, which matters most in small-to-medium rental businesses. This method also has tax implications — for example, you don’t pay tax on rental income that is late and not yet received. Learn more about Cash-Basis Accounting.
How is Azibo’s P&L different from Schedule E?
Azibo’s P&L Statement is designed to help landlords track expenses that affect their cash flow. It does not include depreciation.
Our Schedule E report will show you what your “after-tax” net income/loss is for each rental.
Common P&L mistakes to avoid
Learn common landlord P&L mistakes and how to avoid them to ensure you generate an accurate, compliant P&L for your rental business.
- Missing rental income and expenses. Import all the income and expenses automatically by linking your bank accounts and credit card accounts. If a handful of transactions are still missing, add them manually.
- Incorrect accounting for mortgage payments. Be sure to split and tag your mortgage payment into principal, interest, and escrow to ensure compliant and accurate reports and taxes. Learn more about Accounting for Mortgage Payments in Azibo
- Improperly categorizing repairs and CapEx. Follow the IRS guidelines on what counts as repairs/maintenance vs. capital expenditures. Learn more in our guide Property Improvements and Repairs: Expense or CapEx?
- Booking security deposits as income. Since security deposits do not count as rental income, they should not be listed on the P&L. Similarly, a returned security deposit is not an expense.
- Reporting expenses before a unit is in service. Costs incurred before your rental business is up and running do not count as operating expenses and should not be included in the P&L. Instead, they are capital expenditures, which have different tax implications.
- Misreporting pre-paid rent. In cash-basis accounting, prepaid rent should always be recognized as income on the date that it’s received, not when it’s due. Learn more about Accounting for Prepaid Rent
- Not reporting insurance and property tax expenses paid by escrow, or not reporting them at the right time. Insurance or tax expenses covered by escrow should be booked when your lender pays, not at the time of your monthly escrow payments. Make sure you don’t miss them or book them too early. Learn more about Expense the insurance when it’s contributed to the escrow account.
- Including owner distributions or contributions. While you might be tempted to list owner distributions (withdrawals from your rental business profits) as expenses and owner contributions (money taken out of your own pocket to fund your rental business) as income, neither should be listed in the P&L.
Azibo Accounting is designed to help you avoid all the above mistakes and human errors in rental accounting. Try it today!
Disclaimer: This content has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting or tax advice.