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Tenant Accounts Receivable & General Ledger
This topic provides additional information on the basic setup of receivable accounts, why actions taken have different affects on account balances, and how data flows from the Tenant Accounts Receivable program to the General Ledger program. For more information on balancing TAR to GL, please see the Balancing TAR to GL at a Glance topic.
Within any accounting system, there is what is referred to as the General Ledger. This is a tracking system designed to accumulate financial (monetary) information, group the financial information by type or category of similar transactions, and provide a means of reporting this information in standardized formats.This topic defines the basic series of transactions and processes that normally occur in a housing agency (HA) . Hopefully, this will help you understand the basic setup of receivable accounts, why actions taken have different affects on the account balances, and how the data flows from the Tenant Accounts Receivable (TAR) program to the General Ledger (GL) program.
General Ledger
Terms
Journal Batch: Manually selecting the account for each side of the transaction, resulting in a balanced entry.
Allocation Tables: In Setup, these are pre-selected accounts that a transaction can use to allocate the dollar amounts to multiple accounts within the ledger based on a percentage value.
Funds: Within each HA operation, there are several different funds. Each fund is defined by the source of funds available for use and the restrictions placed on the use of these funds. Accounting for the assets, liabilities, cash receipts, and disbursements is completely separate within each fund. It is customary for an HA, in order to simplify the accounting and record keeping functions, to receive and disburse all cash from a single bank account. This necessitates additional accounting to reflect the amount of cash received or disbursed from one fund that actually belongs to another fund. This accounting is managed through Due To/Due From accounts. Examples of funds are:
- Public Housing funds, which are divided into different AMPs, or Asset Managed Projects, and each treated as a separate fund;
- Section 8 Vouchers;
- Modernization Funds;
- Central Office Cost Center;
- Other funds as needed or defined by the funding source.
Tenant Accounts Receivable
Terms
There are two terms that involve a tenant owing money to your agency.
Charge: The record of the income at the time of the charge, usually used when an amount due from the tenant for services rendered is not already on their account; for example, rent, work order charges, utilities.
Receivable: The increase on the tenant’s account (or decrease depending on the type of account) when the tenant actually pays on the account; for example, security deposit payments, FSS escrow payments, etc. A receivable is added to an account to show an amount due without actually affecting the account balance.
Actions
There are three types of actions you can take on a tenant account.
Transaction: Type of charge or credit memo.
Transfers: Internal transfers between accounts or transfers to another program (such as Accounts Payable for a refund request).
Receivable:Shows the amount due, but does not change any balances until the amount due is collected or paid.
More on Actions:
Charge a tenant for rent, services, late fees (or basically anything): Creates an entry to increase (credit) an income account and increase (debit) the receivable account associated with the type of charge and the tenant’s development.
Tenant makes a payment: Creates an entry to decrease (credit) the amount the tenant owes on the associated receivable account and increase (debit) the amount of money held in the cash drawer (physical drawer, desk, box or where the money is kept until the deposit is made).
Caution! Charging a tenant and a tenant making a payment require different GL account numbers. Failure to use different account numbers for cash in the bank and for the cash drawer will result in incorrectly dated entries in GL's cash in bank account and, ultimately, no cash flow integrity.
Deposit is made: Decreases (credits) the cash drawer account and increases (debits) the cash in the bank account.
Tenant check returned by the bank as NSF: Records a series of transactions:
- Decreases (credits) cash in bank.
- Increases (debits) the appropriate accounts receivable account.
- Creates an additional cost for the charge the bank charges the client.
- Increases (debits) the bank charge expense and an additional decrease (credit) of the amount of cash in bank.
- Possibly create a tenant charge for the returned check fee which increases (debits) the appropriate accounts receivable account and increases (credits) an income account.
Credit Memo to remove a previous charge: Creates entries in GL that are the reverse of the original charge function.
Transfer of balances from one account to another: As an account is a detailed listing of transactions that add up to the balance in GL, any transfer of the transactions or balance in the account to another account also requires corresponding transactions in GL to reflect this transfer.
Tenant owes on escrow account: Use a receivable action to show the amount due, but not to change the balance on the escrow account until the payment is actually made.
Request a refund: This action does not, by itself, create any journal transactions in GL. It does, however, transfer the amounts and appropriate GL account numbers to Accounts Payable to generate a check to affect the refund. This check then creates the journal entry that records refund request action.
Public Housing tenant signs up for FSS program: When the tenant qualifies for a transfer of rent paid into the FSS escrow account, there are specific transactions and actions used to record this function. The first three steps are completed at the beginning of each month. The fourth step, which is the payment, is completed when it is received:
- Record the normal rent charge.
- Create a credit memo to reduce the amount due to the regular TAR account for the amount that will be paid into the FSS escrow account.
- Add a receivable in the FSS escrow account for the amount of rent payment that is to be transferred to this account.
- Tenant pays.
- Interest earned or charged on an account (escrow accounts increase the balance due to the tenant when interest is added).
Accounts
Within TAR, there are four types of accounts.
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Accounts Receivable account: The master account that all customers have. This type of account records charges and payments. Each charge on the account is due in full as of the date of the charge. Periodic payments are allowed, but any charge not paid or credited off is past due as soon as the charge date is passed. |
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Escrow account: An escrow account is a security deposit, pet deposit, FSS escrow account, or other account where the value on the account accumulates or increases as payments are made into the account. There are no charges, thus no transactions associated with this type of account. The user may set up a receivable (not a charge), to show how much the tenant should be paying, but receivables are not associated with any GL account number. Thus, escrow accounts do not create a journal transaction. The payment, however, does create a transaction which credits the account and debits the cash drawer. The balance of the escrow account continues to accumulate as a negative balance to show that the HA owes the tenant the amount reflected in the account. |
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Revolving credit account: This is a repayment agreement type account. Amounts charged on the primary accounts receivable account are transferred to this account and this transfers the balance due. Then, recurring receivable amounts are defined for the monthly payment amounts that should be paid to reduce the overall balance due. There are no transactions associated with this account as all charge items have already been recorded on the AR account and transferred. |
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Mortgage account: This account type is similar to the revolving credit account in setup and actions. |
For example, an HA charges a tenant rent in the amount of $225.00 for the month of June 2008. Below is a description of the series of transactions that occur with this action and how each of these transactions are then recorded in GL as a balanced entry (as a credit and a debit).
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Consider where the money is coming from. It eventually comes from the tenant, but, why? |
- You are charging rent, so the money is coming from rent charges or rent income or dwelling rental revenue.
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Consider where the money is going. |
- The tenant is not actually paying, you are just charging the tenant for something they will pay. Thus, we are increasing the amount of receivablefrom the tenant, or tenant accounts receivable.
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Consider how to properly record charging rent in General Ledger. |
- On one side of the balanced entry, you creditthe amount (represented by a negative sign) to the dwelling rental income (since this is where the money is coming from). Then, add the amount to the balance already on the account to arrive at the total to date amount.
- On the other side of the balanced entry, you debitthe amount (represented by a plus sign) to tenant accounts receivable (since this is where the money is going). Again, add the amount to the balance already on the account for a total to date amount. The date of the transaction is June 2008, and the reference, or description, of this transaction should describe what is happening; i.e. "tenant name - rent charge."
Payments, deposits, NSF checks, write-offs, transfers to other types of accounts, security deposit payments, refunds, other types of charges, are examples of the transaction types found in TAR. The series of transactions are the same as listed above, just with different descriptions, and each series of transactions that are recorded in GL have to be a balanced entry (credit and debit).
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