Yet Another Basic Accounting Question

[James H. Bennett]

Rob,

Seems to me that you are acquiring an asset, your house, a piece at a 
time and that your"expenses" are actually part of the cost of your 
house.  So a check, e.g. for lumber, would be debited in your 
asset:house acct.

As for revaluing, I don't think you account for it at all until your 
house is sold.  At that time any increase (decrease) in value would be 
profit (loss).  Having someone say that your house is worth $whatever is 
not an accounting event.  The only reason to keep track of estimated 
valuations is to have a better idea of current net worth or to borrow 
against the asset.

Of course I could be completely wrong about this, not being an 
accountant.  :-)  I'm sure someone will correct me if that is the case.

Jim

Rob Brown-Bayliss wrote:

>Hi, I have a house that I am building (taking forever on the weekends -
>bad move) and I have accounted for it as an asset, and expenses for
>construction.
>
>Soon we are going to get it re-valued so we can beg the bank for some
>more money, and I expect it to increase in value quite dramatically.
>
>How would I treat the increase in the asset, for example does it come
>from an income account?
>
>The increase should be more than we have in the construction expense
>account.  Should this not have been treated as an expense?
>