How trust accounting actually works inside AppFolio: the full structure
How trust accounting actually works inside AppFolio: the full structure
Most AppFolio users know the platform handles trust accounting. Fewer understand how the structure actually works, which matters when something goes wrong or an auditor asks you to explain your books.
AppFolio supports three bank account configurations. The simplest is one bank account with one cash GL account. The second is one bank account with two cash GL accounts, typically one for operating funds and one for escrow. The third is two separate bank accounts with two cash GL accounts. Which setup you use depends on your state's requirements and whether you're required to keep security deposits in a separate account.
Every transaction in AppFolio requires a property. There is no way to post without selecting a property, which means every dollar in the system is traceable to a specific property and by extension to a specific owner. This is the foundation of the trust ledger structure.
The key GL accounts are set in General Settings under Manage Accounting Settings. Rent Income is the main revenue GL. The Prepayment account holds advance rent. The Security Deposit account is an escrow liability. The Operating Cash account is your main trust bank account. The Escrow Cash account is your security deposit bank account if you run them separately. Management Fees is where your company's revenue lands after the Pay Management Fees function posts bills.
The three-way reconciliation in AppFolio closes the loop between all of these. The Statement Ending Balance from your bank has to match the Cleared Balance in AppFolio, which has to match the Adjusted Cash Balance calculated from all property ledgers. When all three match, your books are clean. When they don't, the diagnostic tools point you to where the break is.
AppFolio defaults to cash basis accounting. Accrual basis is available but requires a support request to enable. Most property management trust accounting runs on cash, which means income and expenses are recorded when cash actually moves rather than when they're earned or incurred.
One thing that catches new AppFolio users: manual receipts have to be added to a deposit before the funds are available for payments or reconciliation. A receipt sitting outside a deposit won't show up correctly in the reconciliation workflow. This is one of the more common sources of a beginning-of-month discrepancy.
How trust accounting actually works inside AppFolio: the full structure
Most AppFolio users know the platform handles trust accounting. Fewer understand how the structure actually works, which matters when something goes wrong or an auditor asks you to explain your books.
AppFolio supports three bank account configurations. The simplest is one bank account with one cash GL account. The second is one bank account with two cash GL accounts, typically one for operating funds and one for escrow. The third is two separate bank accounts with two cash GL accounts. Which setup you use depends on your state's requirements and whether you're required to keep security deposits in a separate account.
Every transaction in AppFolio requires a property. There is no way to post without selecting a property, which means every dollar in the system is traceable to a specific property and by extension to a specific owner. This is the foundation of the trust ledger structure.
The key GL accounts are set in General Settings under Manage Accounting Settings. Rent Income is the main revenue GL. The Prepayment account holds advance rent. The Security Deposit account is an escrow liability. The Operating Cash account is your main trust bank account. The Escrow Cash account is your security deposit bank account if you run them separately. Management Fees is where your company's revenue lands after the Pay Management Fees function posts bills.
The three-way reconciliation in AppFolio closes the loop between all of these. The Statement Ending Balance from your bank has to match the Cleared Balance in AppFolio, which has to match the Adjusted Cash Balance calculated from all property ledgers. When all three match, your books are clean. When they don't, the diagnostic tools point you to where the break is.
AppFolio defaults to cash basis accounting. Accrual basis is available but requires a support request to enable. Most property management trust accounting runs on cash, which means income and expenses are recorded when cash actually moves rather than when they're earned or incurred.
One thing that catches new AppFolio users: manual receipts have to be added to a deposit before the funds are available for payments or reconciliation. A receipt sitting outside a deposit won't show up correctly in the reconciliation workflow. This is one of the more common sources of a beginning-of-month discrepancy.
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