Property Accounting Glossary

1099 Preparation

The process of compiling vendor payment data at year-end to issue IRS Form 1099-NEC or 1099-MISC to non-employee service providers paid $600 or more during the fiscal year.

Absorption Rate

The rate at which available rental units in a market are leased or sold over a specific period, used to gauge market demand and forecast lease-up timelines.

Accounts Payable (A/P)

A liability on the balance sheet representing invoices and bills owed to vendors, contractors, and suppliers that have not yet been paid.

Accounts Payable Aging Report

A categorized report showing outstanding vendor invoices grouped by how long they have been unpaid (e.g., 0–30, 31–60, 61–90+ days).

Accounts Receivable (A/R)

Amounts owed to the property by tenants or other parties for rent, fees, or services rendered but not yet collected.

Accounts Receivable Aging Report

A report categorizing outstanding tenant balances by age, helping identify delinquent accounts requiring collections attention.

Accrual Accounting

An accounting method in which revenue is recorded when earned and expenses when incurred, regardless of when cash is received or paid. The standard approach for GAAP-compliant property accounting.

Accrued Expenses

Expenses that have been incurred but not yet paid or recorded in the accounts payable ledger, such as accrued interest or accrued management fees.

Accrued Income

Revenue earned during a period that has not yet been received or recorded, such as rent earned but not yet paid by a tenant.

Affordable Housing

Residential properties subject to government income restrictions and rent limits, often financed through programs such as LIHTC, HUD Section 8, or Rural Development subsidies.

Agency Agreement

A contract establishing the property management company as an agent of the owner, defining scope of authority, fee structure, and fiduciary obligations.

Allocation

The process of distributing shared costs — such as payroll, utilities, or common area expenses — across multiple properties, units, or cost centers based on a defined method.

Amortization

The systematic expensing of an intangible asset or loan cost over its useful life. In property accounting, loan origination fees and lease incentives are commonly amortized.

Ancillary Income

Revenue generated from sources other than base rent, including parking fees, pet fees, storage fees, laundry income, and late charges.

Annual Budget

A forward-looking financial plan projecting revenues and expenses for a property over a 12-month period, used as the benchmark for budget-to-actual reporting.

Annualization

The process of projecting an annual figure from partial-year data, typically by dividing year-to-date totals by elapsed months and multiplying by 12.

AP Approval Workflow

The internal process for reviewing, authorizing, and coding vendor invoices before payment, ensuring proper segregation of duties and spend controls.

Asset Class

A category of property type (multifamily, office, retail, industrial, self-storage, etc.) used to group assets with similar risk profiles and accounting treatments.

Asset Management

The oversight of real estate investments to maximize value and returns, encompassing financial reporting, capital planning, lease management, and performance benchmarking.

Assets

The portion of the balance sheet representing what the property owns: cash accounts, accounts receivable, prepaid expenses, and the net book value of real estate and equipment.

Audit Trail

A chronological record of all accounting transactions and system events, providing documentation for internal review or external audit and ensuring financial accountability.

Authorized Signatory

An individual with the legal authority to approve and execute financial transactions, such as check signing, wire transfers, or contract execution, on behalf of a property entity.

Automated Clearing House (ACH)

An electronic network used to process direct bank transfers for rent payments, owner distributions, and vendor disbursements, reducing reliance on paper checks.

Bad Debt

Amounts owed to the property — typically unpaid rent or damage charges billed to past tenants — that have been determined to be uncollectible and written off as an expense.

Bad Debt Reserve

A contra-asset account or budgeted expense line that anticipates future uncollectible receivables, providing a cushion against tenant defaults.

Balance Sheet

A financial statement showing a property's assets, liabilities, and equity (owner's net interest) as of a specific date. One of the three core financial statements in property accounting.

Bank Reconciliation

The monthly process of comparing a property's internal ledger records to the bank statement to identify discrepancies, uncleared transactions, or errors. Required for trust account compliance.

Base Rent

The minimum contractual rent payment specified in a lease, before any adjustments for escalations, operating expense pass-throughs, or concessions.

Beneficial Owner

The individual or entity that ultimately owns or controls a property or business entity, as distinct from the legal titleholder, particularly relevant for KYC and compliance purposes.

Bill-Back

A charge passed from the property manager or landlord to a tenant for a specific expense — such as utilities, repairs, or CAM overages — as defined by the lease.

Bookkeeping

The systematic recording of day-to-day financial transactions for a property, including rent receipts, vendor payments, and bank deposits. The foundation of property accounting.

Breakeven Occupancy

The occupancy rate at which a property's gross income equals its total operating expenses and debt service, below which the property operates at a loss.

Budget Narrative

A written explanation accompanying a budget submission that details variances between the prior year, current year-end projections, and the proposed budget for each line item.

Budget Variance

The difference between a budgeted line-item amount and the actual amount recorded for a given period. Variances may be favorable (positive) or unfavorable (negative).

Budget-to-Actual

A comparison report juxtaposing budgeted amounts with actual income and expense figures for the current period and year-to-date, the primary tool for monthly financial review.

Building Operating Expenses

All costs incurred to operate and maintain a property, including utilities, repairs, insurance, property taxes, management fees, and payroll.

CAM (Common Area Maintenance)

Operating expenses for shared spaces in commercial and multifamily properties, such as lobbies, parking lots, and landscaping, often billed back to tenants on a pro-rata basis.

CAM Reconciliation

An annual (or periodic) process reconciling estimated CAM charges billed to tenants throughout the year against actual CAM expenses, resulting in a credit or additional invoice.

Capital Expenditure (CapEx)

Spending on improvements or replacements that extend the useful life of a property or add material value, capitalized on the balance sheet and depreciated over time rather than expensed immediately.

Capital Improvements

Property upgrades that are major, long-lived, and generally cost over a defined threshold (often $500 or $2,500+), treated as capital expenditures rather than operating expenses.

Capital Needs Assessment (CNA)

A long-term (typically 20-year) projection of a property's physical replacement needs, detailing the remaining useful life of each building component and the required reserve funding schedule.

Capital Reserve

Funds set aside to cover future major capital expenditures such as roof replacement, HVAC systems, or parking lot resurfacing. Often required by lenders and regulatory agencies.

Capitalization

The accounting treatment of reclassifying a cost from an operating expense to a balance sheet asset, spreading the cost over the asset's useful life through depreciation.

Cash Accounting

An accounting method in which revenue is recorded when cash is received and expenses when cash is paid. Simpler than accrual but may not accurately reflect a property's financial condition.

Cash Flow

The net amount of cash moving into or out of a property during a period. Positive cash flow indicates the property generates more cash than it consumes.

Cash Flow Statement

A financial statement summarizing cash inflows and outflows from operations, investing activities, and financing activities over a reporting period.

Cash-on-Cash Return

A return metric calculated by dividing annual pre-tax cash flow by total cash invested, used to evaluate the income-generating performance of a real estate investment.

Chart of Accounts (COA)

A numbered classification system listing all income, expense, asset, liability, and equity accounts used in a property's general ledger. Standardized COAs improve comparability across portfolios.

Close Process

The month-end or year-end sequence of accounting steps — including reconciliations, accruals, adjusting entries, and report generation — required to finalize financial records for a period.

Closing Entry

A journal entry made at the end of an accounting period to transfer balances from temporary income and expense accounts to retained earnings, resetting them to zero for the new period.

Commingling

The prohibited practice of mixing client (tenant or owner) funds with a property management company's own operating funds. Commingling violates trust accounting rules and can result in license revocation.

Common Area

Shared spaces within a property — hallways, lobbies, fitness centers, parking structures — that all tenants or residents have the right to use, and whose operating costs may be allocated among tenants.

Concession

A reduction in rent or fees granted to attract or retain a tenant, such as one month of free rent or a reduced security deposit. Concessions are typically amortized over the lease term.

Contract Rent

The total rent due under a lease, comprising the tenant's portion plus any subsidy payment. Used as the basis for calculating gross potential rental income.

Cost Basis

The original purchase price of a property plus acquisition costs, capital improvements, and other capitalized expenses, used to calculate depreciation and gain or loss on sale.

Cost Center

A designated accounting unit — such as a property, building, or department — used to track and allocate expenses separately for management and reporting purposes.

Cost Segregation

A tax strategy that reclassifies components of a property into shorter depreciation periods (5, 7, or 15 years vs. 27.5 or 39 years), accelerating depreciation deductions.

Credit Loss

Income that is budgeted but not collected due to tenant defaults, vacancies, or concessions. Also referred to as vacancy and credit loss or effective gross income deductions.

Current Assets

Assets expected to be converted to cash within 12 months, including cash, accounts receivable, prepaid expenses, and security deposits held at the balance sheet date.

Current Liabilities

Obligations due within 12 months, including accounts payable, accrued expenses, prepaid tenant rent, and the current portion of long-term debt.

Debt Coverage Ratio (DCR)

A key lender metric calculated as Net Operating Income divided by total annual debt service. A DCR above 1.0 means the property generates enough income to cover its mortgage payments.

Debt Service

The total principal and interest payments required on a property's mortgage or loans over a given period, typically monthly or annually.

Deferred Maintenance

Necessary repairs or replacements that have been postponed, often creating a backlog that increases long-term capital needs and can negatively affect property value and tenant retention.

Deferred Maintenance Reserve

Funds set aside specifically to address the accumulated backlog of deferred maintenance items identified in a property inspection or capital needs assessment.

Deferred Revenue

Cash collected in advance for services or rent not yet earned, recorded as a liability until the revenue recognition criteria are met (e.g., prepaid rent received for future months).

Deficit

A financial condition in which a property's expenses exceed its income for a given period, resulting in a negative net operating income on the income statement.

Delinquency Report

A listing of tenants who have unpaid balances, showing the amount owed and the age of each outstanding charge. Used for collections tracking and owner reporting.

Depreciation

The systematic allocation of the cost of a tangible asset — building, equipment, or improvement — over its estimated useful life as a non-cash operating expense for tax or GAAP reporting.

Direct Costs

Costs directly attributable to a specific property or unit, such as unit repairs, property taxes, and insurance, as opposed to overhead expenses shared across the management company.

Disbursement

Any payment made from a property's operating or trust account to vendors, owners, or other parties. All disbursements must be supported by documentation and properly coded.

Double-Entry Bookkeeping

The foundational accounting principle requiring every financial transaction to be recorded as both a debit and a credit in at least two accounts, ensuring the accounting equation always balances.

Draw Schedule

A pre-agreed timeline for releasing capital improvement or renovation funds, typically tied to project milestones, used when funds are held in escrow or by a lender.

Due Diligence

The process of verifying a property's financial records, lease abstracts, physical condition, and legal standing prior to acquisition or financing. Includes review of rent rolls, operating statements, and rent rolls.

Economic Occupancy

The ratio of actual rent collected to gross potential rental income, accounting for vacancies, concessions, and credit losses. Distinct from physical occupancy, which counts only occupied units.

Effective Gross Income (EGI)

Gross potential rental income minus vacancy loss and credit loss, plus ancillary income. EGI represents the realistic total revenue a property is expected to collect.

Electronic Funds Transfer (EFT)

The digital transfer of money between bank accounts, including ACH payments, wire transfers, and direct deposits used for rent collection, owner distributions, and vendor payments.

Entity Accounting

Maintaining separate financial records for each legal entity (LLC, LP, corporation) that owns or manages real estate, ensuring accurate reporting at the ownership structure level.

Equity

The owner's net interest in a property, calculated as total assets minus total liabilities. Also called net equity, owner's equity, or retained earnings.

Escrow Account

A restricted bank account holding funds for a specific future purpose — such as tax and insurance payments, security deposits, or replacement reserves — separate from operating accounts.

Expense Cap

A lease provision limiting the annual increase in a tenant's share of operating expense pass-throughs, protecting tenants from uncapped CAM escalations.

Expense Pool

The total set of operating expenses eligible for tenant reimbursement under CAM or NNN lease provisions, often subject to specific inclusions and exclusions defined in the lease.

Expense Ratio

Operating expenses divided by effective gross income, expressed as a percentage. A key benchmarking metric used to assess a property's operational efficiency relative to peers.

Expense Reimbursement

Amounts billed to commercial tenants to recover a share of operating expenses such as property taxes, insurance, and maintenance, as defined by the lease agreement.

Fair Housing Act

Federal legislation prohibiting housing discrimination based on race, color, religion, sex, national origin, disability, or familial status, governing marketing, tenant selection, and property management practices.

Fee Income

Revenue earned by a property management company, including management fees, leasing commissions, renewal fees, maintenance markups, and other service-based charges.

Fiduciary Responsibility

The legal and ethical obligation of a property manager to act in the best financial interest of the property owner, exercising loyalty, care, and sound judgment in managing assets and funds.

Financial Statements

The primary output of property accounting: the income statement (P&L), balance sheet, and cash flow statement, used by owners, lenders, and investors to evaluate financial performance.

Fiscal Year

The 12-month accounting period a property uses for financial reporting. It does not have to align with the calendar year; common fiscal years end June 30 or September 30.

Fixed Expenses

Operating costs that remain constant regardless of occupancy, such as property taxes, insurance premiums, base management fees, and ground lease payments.

Float

The short period between when a check or payment is issued and when it clears the bank, creating a temporary difference between book balance and bank balance.

Foreclosure

A legal process in which a lender takes possession of a property after the borrower defaults on loan obligations, often triggering accelerated accounting close and asset transfer procedures.

Free Rent Period

A lease concession granting a tenant occupancy without rent obligation for a defined period, often at lease commencement. Accounted for as a deferred expense amortized over the lease term.

Full-Service Gross Lease

A lease structure in which the landlord pays all operating expenses, including utilities, maintenance, and property taxes, with a single all-inclusive rent from the tenant.

Fund Accounting

An accounting system tracking financial resources separately by purpose or restriction, common in affordable housing, nonprofits, and properties with multiple investors or regulatory programs.

GAAP (Generally Accepted Accounting Principles)

The standardized set of accounting rules, concepts, and procedures established by the Financial Accounting Standards Board (FASB), governing how financial statements must be prepared and presented.

General Ledger (GL)

The master accounting record containing all financial transactions for a property, organized by chart of accounts codes. Every journal entry flows through the general ledger.

Gross Lease

A lease in which the landlord bears all or most operating expenses, as opposed to a net lease in which tenants pay some or all costs directly.

Gross Potential Rental Income (GPR)

The maximum rental revenue a property could earn if every unit were occupied at full contract rent for the entire period. The starting point for the income section of an operating statement.

Gross Revenue

All income collected by a property before deducting vacancies, credits, expenses, or debt service. Includes rent, ancillary income, and expense reimbursements.

Gross-to-Net

The reconciliation from gross potential rent to net collected rent after accounting for vacancy, concessions, bad debt, and other deductions, showing how efficiently a property converts potential income to actual revenue.

Ground Lease

A long-term lease of the land beneath a building, with the tenant (lessee) responsible for constructing and owning the improvements. Ground lease payments are recorded as operating expenses.

HAP Contract (Housing Assistance Payments)

A written agreement between a property owner and a government agency specifying the subsidy amount to be paid to the property on behalf of qualifying tenants over a defined contract term.

Historical Cost

The original purchase price or cost of an asset at the time of acquisition, used as the basis for balance sheet carrying value and depreciation calculations under GAAP.

Impound Account

A lender-managed escrow account funded monthly by the borrower to cover future property tax and insurance premium payments, ensuring these obligations are met on time.

Income Statement

A financial report showing all revenue, operating expenses, and net operating income for a property over a defined period. Also called a P&L, monthly report, or operating statement.

Insurance Escrow

A restricted account funded monthly to accumulate cash for annual or semi-annual property insurance premium payments, often required by mortgage lenders.

Interest

The cost of borrowing money, recognized as an operating expense on the income statement. Distinct from principal repayments, which appear as financing outflows on the cash flow statement.

Intercompany Transactions

Financial transfers or charges between related entities under common ownership — such as management fees between a management company and a property LLC — requiring elimination in consolidated reporting.

Internal Audit

A periodic internal review of a property's financial records, compliance procedures, and internal controls, distinct from an annual CPA audit, used to identify errors and risks proactively.

Internal Controls

Policies and procedures designed to safeguard assets, ensure financial reporting accuracy, and prevent fraud — including approval workflows, segregation of duties, and access controls.

Invoice Approval

The workflow step in which an authorized person reviews, codes, and approves a vendor invoice for payment before it is processed through accounts payable.

Journal Entry

A record in the general ledger documenting a financial transaction as a debit to one or more accounts and a corresponding credit to one or more other accounts, following double-entry bookkeeping principles.

Landlord Recovery

Amounts a landlord recovers from a tenant for costs the landlord initially paid, such as utilities, repairs caused by tenant damage, or CAM expense overages.

Late Fee

A charge assessed to a tenant for failing to pay rent by the contractual due date, typically defined in the lease and subject to state law limitations.

Lease Abstraction

The process of extracting and summarizing key financial and operational terms from a lease document — such as rent amounts, escalations, option dates, and tenant obligations — for accounting and management use.

Lease Administration

The ongoing management of lease terms, critical dates, rent escalations, CAM reconciliations, and tenant billings to ensure lease compliance and accurate property accounting.

Lease Commencement Date

The date on which a lease term officially begins and the tenant assumes legal possession of the unit, triggering the start of rent obligations and security deposit accounting.

Lease Concession

Any reduction in rent or fees offered to a tenant, including free rent periods, reduced deposits, or tenant improvement allowances, which must be properly accounted for over the lease term.

Lease Escalation

A contractual provision increasing base rent at defined intervals — either by a fixed percentage, CPI index, or step schedule — requiring accounting adjustments at each escalation date.

Lease Incentive

A benefit provided by a landlord to induce a tenant to sign a lease, such as a tenant improvement allowance or moving expense reimbursement, treated as a deferred cost amortized over the lease term.

Lease Renewal Fee

A fee charged by a property manager to the owner upon successfully renewing an existing tenant's lease, as defined in the management agreement.

Lease Termination Fee

A contractually agreed payment by a tenant for early lease termination, recognized as revenue by the landlord in the period received or amortized per the terms.

Lease-Up Period

The period following a new property opening or major renovation during which the property fills to stabilized occupancy, often characterized by elevated concessions and lower effective revenue.

Letter of Credit (LOC)

A bank-issued financial instrument guaranteeing payment to the landlord up to a specified amount if a tenant defaults, used as an alternative to a cash security deposit for commercial leases.

Liabilities

The total financial obligations of a property — including accounts payable, accrued expenses, security deposits held, and long-term debt — shown on the balance sheet.

LIHTC (Low Income Housing Tax Credit)

A federal tax incentive program providing dollar-for-dollar tax credits to developers who build or rehabilitate affordable rental housing for low-income households, governed by IRS Section 42.

Loan Covenant

A condition in a loan agreement requiring the borrower to maintain specific financial metrics — such as minimum DSCR, occupancy rate, or reserve balances — or face default or lender remedies.

Lock Box Banking

A banking arrangement in which tenant rent checks are mailed directly to a bank-managed address (lock box), speeding up deposit processing and reducing handling risk.

Loss-to-Lease

The difference between a unit's current market rent and the lower contracted rent being collected from an existing tenant, representing unrealized income potential in the rent roll.

Management Agreement

The contract between a property owner and a management company defining the scope of services, management fee structure, expense approval authority, and fiduciary obligations.

Management Fee

Compensation paid to a property management company, typically calculated as a percentage of collected gross revenue (commonly 4–12% depending on asset class and scope of service).

Management Fee Structure

The specific terms defining how management fees are calculated and collected — whether as a percentage of gross collections, a flat monthly amount, or a hybrid model.

Mark-to-Market

The process of adjusting below-market rents to current market rates, often required during mortgage restructuring or regulatory programs for subsidized housing properties.

Market Comparability Study (MCS)

An analysis identifying similar properties in a market to compare rents, occupancy, and amenity offerings, used to support rent pricing decisions and subsidy contract renewals.

Market Rate Rent

The rent a unit would command in the open market without rent restrictions, used to calculate loss-to-lease and assess the performance of regulated affordable housing properties.

Modified Gross Lease

A lease structure in which operating expenses are split between landlord and tenant through negotiated terms, falling between a full-service gross lease and a net lease.

Month-End Close

The completion of all accounting activities for a calendar month, including reconciliations, accrual postings, and financial statement generation, prior to releasing reports to owners or investors.

Monthly Financial Report

A package of financial statements and schedules — typically including the income statement, balance sheet, variance report, and rent roll — delivered to owners after the month-end close.

Mortgage

A secured loan used to finance real estate, with the property serving as collateral. Monthly payments are split between interest expense (P&L) and principal reduction (balance sheet).

Mortgage Insurance Premium (MIP)

An insurance fee required on HUD-insured mortgages when the borrower contributes less than 20% equity, payable monthly and treated as an operating expense.

Move-In/Move-Out Accounting

The accounting processes associated with tenant transitions, including security deposit collection at move-in and charge-back, refund, or forfeiture calculations at move-out.

Negative Variance

A budget variance that is unfavorable to the owner: actual income is below budget or actual expenses are above budget, indicating underperformance relative to plan.

Net Cash Position

The final cash balance after accounting for net operating income and all other cash transactions (reserve fundings, debt service, and capital contributions), the bottom line of an operating budget.

Net Lease

A lease requiring tenants to pay base rent plus some or all operating costs, including property taxes (Net), insurance (Net Net), and maintenance (Triple Net/NNN).

Net Operating Income (NOI)

Total property income minus total operating expenses, before debt service and capital expenditures. The most widely used metric in property performance evaluation and asset valuation.

Net Potential Rent (NPR)

Gross potential rental income minus vacancy loss, representing the rent collectible if all units are occupied at contract rent, net of vacancy.

Non-Cash Expense

An accounting expense that reduces net income but does not involve an outflow of cash, most commonly depreciation and amortization.

Non-Profit Organization

An entity that operates for a stated mission rather than profit distribution. Surplus income is retained as a property asset rather than distributed to owners.

Non-Rent Bearing Unit (NRB)

A unit dedicated to staff housing or other operational use that generates no rental income, such as a resident manager's apartment or a maintenance storage space.

Normalized NOI

Net operating income adjusted to remove one-time, non-recurring items — such as insurance proceeds or extraordinary repairs — to reflect the property's stabilized earning capacity.

Notice to Terminate (NTT)

A legal notice from either party to end a tenancy at the end of a lease term or following a defined notice period, triggering move-out accounting and unit turnover procedures.

Occupancy Rate

The percentage of total units that are occupied at a given time. Physical occupancy counts occupied units; economic occupancy measures the ratio of collected rent to gross potential rent.

Operating Budget

A line-item financial plan projecting all revenues and expenses for a property over the coming fiscal year, serving as the standard for monthly budget-to-actual reporting.

Operating Deficit

A condition in which operating expenses exceed operating income, requiring the owner or a lender to fund the shortfall through an operating deficit loan or capital contribution.

Operating Deficit Loan

A lender-provided credit facility allowing a property to borrow funds to cover operating shortfalls during lease-up or distressed periods, typically repaid from future surplus cash.

Operating Expense Ratio (OER)

Total operating expenses divided by gross potential income, expressed as a percentage. A lower OER indicates greater operational efficiency.

Operating Statement

A financial report summarizing revenues and expenses for a property over a period, used interchangeably with income statement, P&L, or monthly report.

Other Cash Transactions

Balance sheet and financing items affecting the property's cash position that are not recorded on the income statement, including reserve fundings, debt service principal, and capital contributions.

Other Income

Revenue from sources other than scheduled base rent, such as laundry income, parking, storage fees, application fees, pet fees, and vending machine revenue.

Outstanding Check

A check that has been issued and recorded in the property's books but has not yet cleared the bank, creating a reconciling item in the bank reconciliation.

Overhead

General management company costs not directly attributable to a specific property, including corporate office rent, administrative salaries, and shared software subscriptions.

Owner Contribution

Cash funded into a property by the owner to cover operating deficits, capital improvements, or reserve shortfalls, recorded as an equity inflow on the balance sheet.

Owner Distribution

Cash paid to a property owner from surplus operating cash or refinancing proceeds, representing a return on their equity investment, recorded as an equity reduction.

Owner Statement

A periodic financial report delivered to owners summarizing income collected, expenses paid, management fees charged, and net proceeds distributed or held during the reporting period.

Pass-Through Expenses

Operating costs — such as property taxes, insurance, and CAM charges — that the landlord pays but recovers from tenants under the terms of a net or modified gross lease.

Payback Period

The time required for the cash savings from a capital investment to equal its initial cost, used to evaluate the financial feasibility of energy upgrades or system replacements.

Payroll Allocation

The process of distributing staff wages and benefits across multiple properties or cost centers based on time worked or another allocation method, ensuring accurate property-level expense reporting.

Per Unit Per Month (PUPM)

A normalization method expressing income or expense metrics on a per-unit, per-month basis to facilitate comparisons across properties of different sizes.

Petty Cash

A small fund of cash maintained on-site for minor property expenses such as small supplies or emergency items, subject to reconciliation and replenishment procedures.

Portfolio Accounting

The management and reporting of financial data across multiple properties under common ownership or management, often consolidated into a single reporting package for investors.

Positive Variance

A budget variance favorable to the owner: actual income exceeds budget or actual expenses are below budget, indicating better-than-expected performance.

Prepaid Expenses

Costs paid in advance that benefit future periods — such as annual insurance premiums or prepaid software subscriptions — initially recorded as assets and expensed as consumed.

Prepaid Rent

Rent received from a tenant covering future periods before it is earned, recorded as a liability (deferred revenue) until the applicable period is reached.

Principal

The portion of a mortgage payment that reduces the outstanding loan balance, recorded as a balance sheet liability reduction rather than an income statement expense.

Pro Forma

A forward-looking financial model projecting a property's income, expenses, and returns under a set of assumptions, used for investment analysis, financing, and budgeting.

Profit and Loss Statement (P&L)

An alternate name for the income statement or operating statement, summarizing revenues less expenses to show net operating income for a property over a reporting period.

Project-Based Subsidy

A housing subsidy attached to a specific property rather than a tenant, where tenants receive the subsidy only while residing at that property. Example: project-based Section 8 vouchers.

Property Management Software

Specialized software platforms — such as Yardi, AppFolio, Entrata, or Buildium — used to manage leases, accounting, maintenance, and reporting for rental properties.

Property Operating Statement

A monthly or annual financial report showing a property's revenue, expenses, and NOI, the core document used for owner reporting and asset management review.

Property Tax Escrow

A restricted account funded monthly to accumulate cash for annual or semi-annual property tax payments, ensuring obligations are met on time and often required by lenders.

Prorated Rent

Rent calculated for a partial month when a tenant moves in or out mid-month, based on the daily rate (monthly rent divided by the number of days in the month) multiplied by occupied days.

Prorating Expenses

Allocating a shared expense across multiple properties or periods in proportion to a defined metric such as unit count, square footage, or revenue.

Real Estate Accounting

The specialized branch of accounting governing the recording, reporting, and analysis of financial transactions for real property assets, governed by GAAP, IRS regulations, and state-specific real estate laws.

Reconciliation

The process of comparing two sets of financial records — such as a ledger to a bank statement or a tenant ledger to the rent roll — to confirm they agree and identify discrepancies.

Reforecast

An updated financial projection prepared mid-year to revise the original budget based on actual year-to-date performance and revised assumptions about the remainder of the fiscal year.

Refundable Deposits

Security deposits or other funds held by the property on behalf of tenants that must be returned (less any legally permissible deductions) at the end of the tenancy.

Regulatory Agreement

A binding contract between a property owner and a government agency establishing the rules and obligations governing a subsidized or tax-credit property, including rent limits, tenant income restrictions, and financial reporting requirements.

Remittance

Payment made to a property or vendor, typically referring to tenant rent payments or disbursements from a property manager to an owner.

Rent Collection

The process of billing tenants, receiving payments, and recording receipts in the property management system, including tracking of partial payments and delinquencies.

Rent Concession

A temporary reduction in rent granted to a tenant, reducing effective rental income for the period and requiring accounting adjustment to reflect the reduced cash flow.

Rent Escalation Clause

A lease provision specifying scheduled rent increases at defined intervals, either as a fixed dollar amount, fixed percentage, or based on a cost-of-living index such as CPI.

Rent Roll

A report listing all units in a property with current tenant names, lease dates, contract rents, actual payments received, and outstanding balances. A core document for property management and due diligence.

Rent-Free Unit

A unit provided without charge to a staff member or designated occupant — such as a resident manager — representing a non-rent-bearing unit that reduces gross potential rental income.

Replacement Reserve (RR)

A restricted escrow account funded with monthly deposits to accumulate capital for major future repairs and replacements such as roofs, HVAC systems, and elevators.

Replacement Reserve Funding

Monthly deposits transferred from the operating account into the replacement reserve account, typically required by lenders and regulatory agencies as a condition of financing.

Replacement Reserve Release

A withdrawal from the replacement reserve account to pay for approved capital expenditures, typically requiring lender or agency authorization and supporting documentation.

Reserve Study

A professionally prepared analysis of a property's physical components, their remaining useful lives, and the required annual reserve contributions needed to fund future replacements.

Retained Earnings

Cumulative net income or loss retained within the property entity since inception, after distributions. Shown on the balance sheet as a component of owner's equity.

Return on Investment (ROI)

A measure of the gain or return on a property investment relative to its cost, used to evaluate and compare investment performance across assets or time periods.

Revenue Recognition

The accounting principle governing when revenue may be recorded. Under GAAP, rental income is recognized in the period it is earned (when tenant has occupied the unit), not necessarily when cash is received.

Roll-Forward Schedule

A reconciliation schedule tracking the beginning balance, additions, deductions, and ending balance of a balance sheet account — such as a reserve or security deposit account — over a period.

RUBS (Ratio Utility Billing System)

A method of allocating master-metered utility costs to individual tenants based on a defined formula (unit size, occupancy, or a hybrid ratio) rather than individual submeters.

Section 8

A federal housing assistance program providing rent subsidies to low-income households, either tenant-based (portable vouchers) or project-based (attached to specific properties under HAP contracts).

Security Deposit

A refundable amount collected from a tenant at lease commencement, held in a trust account and applied against unpaid rent or damages at move-out, with any remainder refunded to the tenant.

Security Deposit Accounting

The specialized accounting for tenant security deposits, including collection, trust account segregation, interest calculations (where required by law), deductions at move-out, and timely refund processing.

Segregation of Duties

An internal control principle requiring that no single person controls all steps of a financial transaction (authorization, recording, and custody), reducing the risk of fraud or error.

Self-Storage Accounting

Property accounting specific to self-storage facilities, accounting for unit-level revenue, auction proceeds, lien sale processes, tenant insurance, and high-turnover ledger management.

Service Charge

A fee charged to tenants for services provided by the landlord or manager, such as package acceptance, HVAC filter changes, or amenity access, billed separately from base rent.

Software Integration

The connection of property management software with accounting systems, banking platforms, or data services to automate data flow and reduce manual bookkeeping.

Straight-Line Rent

An accounting adjustment under GAAP spreading total lease revenue evenly over the lease term when a lease contains escalating rents or free rent periods, creating a levelized income recognition.

Sub-Ledger

A detailed subsidiary accounting record tracking transactions for a specific category — such as tenant ledgers, vendor AP ledgers, or property-level GL — that rolls up into the general ledger.

Submetering

The installation of individual utility meters in each unit or space to measure consumption directly, enabling accurate tenant billing and reducing utility expense disputes.

Subsidy

A government or program payment covering the gap between a tenant's rent contribution and the full contract rent for a unit, enabling below-market rent for qualifying households.

Surplus Cash

The amount of operating cash remaining after all operating expenses, debt service, and required reserve fundings are met for a fiscal year, which may be distributed to owners of for-profit properties.

Tax and Insurance (T&I) Escrow

An escrow account funded by monthly deposits to cover periodic property tax bills and insurance premiums, ensuring timely payment and often required by mortgage lenders.

Tenant-Based Subsidy

A housing assistance voucher or certificate attached to a specific tenant rather than a specific property, allowing the tenant to use the subsidy at any qualifying rental unit.

Tenant Improvement Allowance (TI Allowance)

Funds provided by a landlord to a commercial tenant to finance the build-out or improvement of leased space, accounted for as a landlord capitalized asset and amortized over the lease term.

Tenant Ledger

An individual accounting record for each tenant showing all charges, payments, credits, and balances from lease commencement through move-out. The primary tool for tenant billing and collections.

Tenant Rent Payment

The portion of contract rent paid directly by the tenant, as distinct from any subsidy payment made by a government program on the tenant's behalf.

Three-Way Reconciliation

A trust account compliance procedure matching the property management system's trust liability total to the trust bank account balance and the sum of all individual tenant/owner ledgers simultaneously.

Trailing 12 (T12)

A rolling 12-month financial operating statement reflecting actual income and expenses for the prior year regardless of the fiscal calendar, used in acquisition due diligence and lender underwriting.

Trial Balance

A summary of all general ledger account balances at a point in time, confirming that total debits equal total credits. A key step in the month-end and year-end close process.

Triple Net (NNN) Lease

A commercial lease in which the tenant pays base rent plus all three major operating expense categories: property taxes, building insurance, and maintenance costs.

Trust Account

A bank account holding client funds — such as security deposits, prepaid rents, or owner funds awaiting disbursement — that are legally separate from the property manager's operating funds.

Trust Accounting

The regulatory and accounting framework governing the collection, segregation, tracking, and disbursement of client funds held in trust. Required by real estate licensing laws in most states.

Turnaround Time (Make Ready)

The number of calendar days between a tenant move-out and a new tenant move-in, including cleaning, repairs, and inspection. A key operational efficiency metric.

Turnover Rate

The percentage of total units that experienced a resident change during a defined period, calculated as move-outs divided by total units. High turnover increases operating costs.

Unearned Revenue

Cash received for services or occupancy not yet provided, recorded as a current liability until the related performance obligation is satisfied. Common examples include prepaid rent and advance security deposits.

Unit Days

The total available occupancy capacity of a property for a given period, calculated by multiplying the number of units by the number of days in the period. Used as the denominator in vacancy rate calculations.

Unit Mix

The breakdown of a multifamily property by unit type (studio, 1BR, 2BR, 3BR), size, and rent level, used to analyze revenue potential and compare portfolio performance.

Useful Life

The estimated period over which a depreciable asset — such as a roof, HVAC system, or appliance — is expected to provide economic benefit, used to determine the annual depreciation charge.

Utility Billing

The process of calculating and issuing charges to tenants for utility consumption, whether through submetering or a ratio-based allocation method such as RUBS.

Utility Expense Reimbursement

Amounts recovered from tenants to offset landlord-paid utility costs under lease provisions requiring tenant contribution to utility expenses.

Vacancy Loss

The rental income not collected because units are unoccupied, calculated as the sum of vacant unit-days multiplied by the contract daily rent rate. A key deduction from gross potential income.

Vacancy Rate

The percentage of total units or rentable square footage that is unoccupied at a given time, calculated as vacant units divided by total units.

Variable Expenses

Operating costs that fluctuate based on occupancy, usage, or activity levels — such as water, electricity, turnover repairs, and leasing commissions — as distinct from fixed costs.

Variance

The difference between a budgeted amount and the actual amount for a line item in any reporting period. Positive variances are favorable; negative variances are unfavorable to the owner.

Vendor Management

The process of onboarding, credentialing, tracking insurance certificates for, and maintaining relationships with vendors and contractors who provide services to a property.

Vendor 1099

An IRS information return (Form 1099-NEC or 1099-MISC) issued annually to unincorporated vendors paid $600 or more for services rendered to a property during the tax year.

Wire Transfer

An electronic funds transfer sent directly between banks, typically used for large-value transactions such as acquisition proceeds, owner distributions, or loan payoffs.

Working Capital

Current assets minus current liabilities, representing the short-term liquidity available to a property for day-to-day operations. Insufficient working capital can cause cash flow problems.

Write-Off

The accounting action of removing an uncollectible receivable — such as unpaid rent or a security deposit shortfall — from the asset side of the balance sheet and recording it as a bad debt expense.

Year-End Audit

An annual independent examination of a property's financial statements and records by a certified public accountant (CPA), often required by lenders, regulatory agencies, and institutional investors.

Year-End Close

The completion of all accounting procedures for the fiscal year, including final reconciliations, audit preparation, 1099 issuance, and the rollover of balances into the new fiscal year.

Year-to-Date (YTD)

The cumulative total of any financial metric from the first day of the current fiscal year through the most recent reporting date, used for budget-to-actual comparisons and trend analysis.