Glossary

Financial & Accounting

49 terms in this category

Aging Analysis

Report categorizing arrears by delay period: 30, 60, 90, 120+ days, helping prioritize collection and assess risks.

Amortization

Distribution of asset or loan cost over set time period through regular installments, common in real estate loans and long-term investments.

Annual Report

Comprehensive summary of financial and operational property performance during the year, presented to owner and investors, includes revenues, expenses, profits.

Brokerage Fee

Fees real estate broker charges for services in completing sale or rental deal, set as percentage of deal value or fixed amount.

Budget Variance

Difference between planned and actual figures in budget, helping identify problems and adjust future property planning.

Budgeting

Advance financial planning for expected property income and expenses, helping manage cash flow and plan maintenance and investment.

Capital Gain

Profit from selling property at price higher than purchase cost, may be subject to taxes in some countries, exempt in Saudi Arabia for individuals.

Cash Closing

Daily procedure to reconcile cash receipts with records and deposit in bank, ensuring accounting accuracy and preventing loss.

Cash Flow

Net money flowing in and out of real estate investment monthly, positive means profit and negative means deficit, basis of investment decisions.

Collection Efficiency

Ratio of collected rent to due rent, indicator of property management effectiveness, targeting above 95%.

Commission

Percentage real estate offices take for their services, typically 2.5% of annual rent value, paid by landlord or tenant per agreement.

Cost Center

Organizational unit where costs are calculated independently, each property can be a cost center to analyze its profitability.

Debt Service

Total periodic mortgage loan payments including principal and interest, must not exceed certain income ratio to ensure sustainability.

Debt Write-off

Removing overdue debt from accounting records after failed collection attempts, counted as loss, subject to internal procedures and approvals.

Deposit Refund

Returning security deposit to tenant at contract end after verifying property condition, landlord obligated to refund within reasonable time.

Depreciation

Decrease in property value over time due to wear, calculated accounting-wise for tax purposes, gradually reducing asset book value.

E-Invoice (Fatoorah)

Mandatory e-invoicing system in Saudi Arabia since 2021, requiring tax-liable businesses to issue standardized electronic invoices.

Electronic Payment

Rent payment through electronic channels like bank transfer, stcpay, and Mada, providing documented record and easy accounting tracking.

Escrow Account

Bank account where funds are held by neutral third party, released when specific conditions met, used in major real estate transactions.

Escrow Services

Services provided by neutral parties to manage funds in real estate transactions, ensuring rights of both parties and protecting from fraud.

Expense Tracking

System for recording and categorizing all property expenses, helping prepare tax reports and analyze profitability, electronic systems preferred.

FIFO Payment System

Accounting mechanism allocating payments to oldest installments first, used in rental management to reduce arrears and organize records.

Financial Statement

Accounting reports showing financial position of property or office, including balance sheet, income statement, and cash flows, basis of decisions.

Gross Income

Total rental revenue before any expense deductions, used for calculating occupancy rates and gross return on investment.

Late Fee

Penalty imposed on tenant for late rent payment, specified in contract varying by agreement, creating incentive for timely payment.

Late Payment Notice

Official notice sent to tenant when late on rent payment, first step in collection procedures before resorting to legal action.

Maintenance Cost

Expenses for keeping property in good condition, including periodic and preventive repairs, typically 1-2% of property value annually.

Monthly Summary

Periodic report for owner summarizing monthly financial performance, including revenues, expenses, arrears, sent automatically.

Net Income

Total property income after deducting all expenses like maintenance, taxes, and commissions, indicator of real estate investment profitability.

Operating Expenses

Daily property operation costs like maintenance, utilities, management, and insurance, deducted from revenue to calculate net income.

Overdue Payment

Rent installment not paid by due date, requiring reminder procedures then legal action if continued, potentially incurring penalties.

Owner Statement

Periodic report showing owner the details of income, expenses, and arrears for properties, with amount due after commissions.

Payment Method

Approved method for rent payment: bank transfer, cash, check, or card, specified in contract with electronic transfer preferred for documentation.

Payment Schedule

Organized plan for rent installments specifying amount and due date for each, helping track payments and arrears.

Petty Cash

Small cash amount kept by office for daily small expenses, replenished periodically, expenditure must be documented.

Provisional Balance

Temporary accounting balance before final settlement, used for review and changes with updates, settled at account closing.

Real Estate Tax

Taxes on property ownership or transfer, in Saudi Arabia includes 5% real estate transaction tax on sales, exempt for residential rentals.

Recovery Fund

Financial reserve allocated to cover potential losses from arrears or bad debts, contributing to cash flow stability.

Rent Deferral

Agreement between landlord and tenant to postpone rent payment for set period, occurs in exceptional circumstances, must be documented in writing.

Rent Discount

Reducing part of rent by landlord, may be reward for early payment, incentive for renewal, or compensation for property issues.

Rent Payment

Agreed amount tenant pays for property use, monthly or quarterly or annually, documented electronically through Ejar.

Rental Collection

Process of collecting rent payments from tenants regularly, including reminders and follow-up, done electronically through modern systems.

Return on Investment (ROI)

Ratio of profits achieved from real estate investment to total cost, key indicator for investment success, calculated annually.

Revenue Recognition

Accounting principle determining when revenue is recorded in books, usually when rent is earned not received, per accounting standards.

Security Deposit

Amount tenant pays landlord at signing as security for property condition, refunded after deducting damages, typically equal to one month's rent.

Tax Invoice

Official invoice for VAT-applicable transactions, must include tax registration number, QR code, and tax amount.

Trust Account

Special bank account where real estate office holds owners' and tenants' funds, separating office funds from clients, to protect money.

VAT on Rental

15% tax imposed on commercial rentals in Saudi Arabia, residential rentals exempt, paid by tenant to VAT-registered landlord.

Zakat

Islamic obligation imposed on wealth at 2.5% annually, includes properties for trade and sale but excludes those for residence or long-term investment.