limitation of spreadsheet to real estate
Over the past twenty years, changes in the business environment have profoundly affected property management and property management accounting. A few example of these are an increase emphasis on providing value to customers, total quality management, time as a competitive element, advances in information and communication technology, globalization, heightened awareness of ethical and environmental business practice (Hansen and Mowen 2006). These changes are driven by the need to create and sustain a competitive advantage for many estate management firms, the information required to realize a competitive advantage can no longer be derived from a traditional method of property management accounting information system. The traditional method and system relies on functional based control. Unfortunately, this functional based approach often fails to provide information that is detailed, accurate and timely enough to support the requirements of this new environment. This has resulted in the emergence of an activity-based property management accounting system.
The co-existence of these two systems has motivated this research work. More also, have necessitated the research to study both systems thus, providing flexibility and depth of understanding into their pros and cons.
1.2. STATEMENT OF RESEARCH PROBLEM.
The problems that are liable to be encountered are some salient questions, which comes to the mind of the researcher, which include:
1. To what extent can we assess the advantages and limitation of spreadsheet to real estate accounting?
2. To what degree does the various types of manual property accounting book keeping kept by the property manager is likely to be carried out through a spreadsheet system?
3. What likely problems do the property manager is likely to encounter if he should adopt a spreadsheet based property management accounting system?
1.3 AIM AND OBJECTIVES OF STUDY
The aim of this research work is to evaluate the strengths and weakness associated with the use of spreadsheet, in keeping of accounting records for property management activities.
In order to achieve this aim, the following objectives:-
1. To identify the various accounting records administered by a property manager.
2. To evaluate the strength in the use of spreadsheet-based property management accounting.
3. To examine the weakness associated with the use of spreadsheet in property management accounting; and
4. To assess the willingness of property managers to adopt spreadsheets in property management accounting.
1.4 SCOPE AND LIMITATION OF STUDY
The scope of this study will be basically on the advent of spreadsheet and its versatile application within the microcomputer environment and how it is employed by property managers in property management accounting, taking into consideration its advantages and constraints.
1.5 SIGNIFICANCE OF STUDY
This study intends to assist property management firms, property developers, real estate appraisers, etc on the need to keep a good management and financial accounting record with recourse to spreadsheets with a view to achieving transparency, efficiency, detailed and more accurate functional based financial accountability to their clients.
The study also will add to the existing knowledge which other practicing property managers have in property management accounting, by using spreadsheet to bring financial management closer to the user, so that the user will be able to manage his/her finances closely with the use of information and communication technology (ICT) tool.
1.6 LIMITATION OF STUDY
Likely constrains envisaged was the beaurecratic delays from the property manager of the firm which posed a problems towards the accessibility of information needed in carrying out this research work.
1.7 BRIEF DESCRIPTION OF STUDY AREA
This study tends to study the various types of bookkeeping in estate firms, the attitude of property managers in the use of spreadsheet for recording financial transactions, and also evaluate their advantages and disadvantages through experiments using ethnographic and qualitative analysis
1.8 DEFINITION OF TERMS AND ACRONYMS IN THE STUDY
Spreadsheet: An interactive computer application program used for organization, analysis, and storage of data in tabular form. These values and data are organized into rows and columns, similar to the ruled paper worksheet traditionally used by bookkeepers and accountants.
Property Management: Is the process of managing property that is available for lease by maintaining and handling all the day-to-day activities that are centered around the piece of real estate.
Bookkeeping: Is the act of recording business transaction, in such a way that the financial position of the business can be known at any time.
Accounting: Refers to the process of identifying, measuring, recording, classifying, summarizing, and communicating financial transactions and events.
CHAPTER TWO
LITERATURE REVIEW
2.0 INTRODUCTION
The use of spreadsheet in carrying out calculations and computations has come to stay, as its just one of the efficient ways in carrying out massive valuations on plants, machineries, facilities and landed properties and also in financial accounts in areas such as ownership/property reporting, tenant infor /rent roll, general ledger/transaction reporting, financial statements, banks statements and reconciliation reports etc. All data entry can be cumbersome and costly for the management firm. Using technology to automate this process makes it much easier for the company to create and enjoy a streamlined process of bookkeeping and accounting, which better serves the owner (Hansen and Mowen 2006)
2.1 THEORETICAL FRAMEWORK
2.1.1 Property Management
According to Ibiam (2010) property management is the process of managing property that is available for lease by maintaining and handling all the day-to-day activities that are centered around the piece of real estate. Property management may involve seeking out tenants to occupy the space, collecting monthly rental payment, maintaining the property, and upkeep of the grounds. Apartment complexes are also handled.
Ogungbenro (2011) sees property management as a term used by real estate agents when they manage the leasing, maintaining and advertising for a particular house or business. It can include finding tenants, collecting rent monies and looking after maintenance such as gardening and small repairs.
2.1.2 Property Management Accounting
The term accounting refers to the process of identifying, measuring, recording, classifying, summarizing and communicating financial transactions and events to enable users to make informed decision (Ebisike, 2010) users of accounting information include business managers, analysts, business owners, creditors, regulators, investors, and customers and suppliers among others.
Ebisike (2010) also stressed that the wide range of users of accounting information underscores the importance of accounting knowledge in business. And that no one can run a very successfully business today without a basic understanding of accounting or the advice of an accountant.
Property management accounting typically involves the management of property that is owned by another party or entity. The property managers act on behalf of the owner to preserve the value of the property while generating income. Managed properties includes residential and vacation properties, commercial retail space or industrial warehouse space. Property managers are typically paid a fee and or a percentage of the rent brought in for the property while under management. Also responsible to provide a detailed schedule of the income and expenditure of the property (Ogungbenro 2013).
Brighenti (2010) suggests that it is the collection of income from a real estate transaction and recording and posting both expenses in a schedule, featuring vendors and purchases made so as to determine the actual property receipt.
2.1.3 Sources of Real Property Income
The major sources of real property income include the following:-
1. Valuation
2. Management
3. Other consultancy jobs
4. Estate Agency
Valuation
The oxford advanced learners dictionary 6th edition defined valuation as a professional judgment about how much money or something is worth and its estimate value.
Olayonwa (2006) defined valuation as the science of estimating the monetary worth of real property, taking into consideration the purpose of valuation and rigorous analysis of that factor that may affect such value.
Milington (1988) sees valuation as an art or science of estimating the value of a specific purpose of a particular interest in property and also considering all the underlying economic factors of the market including the range of alternative investment.
Olayonwa (2007) noted that valuation report is normally prepared when rental or capital value of landed property is determined for various purposes. Rental value is an amount, which a property will let in the open market between a willing tenant and a willing landlord. Capital value is the amount which a property will sell in the market where there is willing buyer and a willing seller.
Management
Nwugo (2013) in her lecture note views management as the definition of organizational goals, and carrying out various task for the attainment of such goals through an organized human and capital resources. Which involves series of process in the method that aid the structuring, analysis, decision making and communication of business issues?
Yenusa (2013) referred to management to as a factor of production along with machines, materials and money which ensures a discipline and consistent approach to analysis and decision making. It facilitates the use of logical thought process that is consistent with the objectives of the firm.
Estate Agency
An estate agent according to Udechukwu (2006) is a person or business that arranges the selling, renting or management of properties and other buildings. They are often engaged in the marketing of property available for sale and a solicitor or licensed conveyance in the preparation of a legal document on land and landed properties. Which a fee is attached to their services.
Baker (2007) sees estate agency as a negotiator between buyers and sellers. Estate agents, market and sell property for clients. They employ and use their knowledge of the local property market to get the best price for the seller.
Other consulting jobs
Olusegun (2011) identified the job of an estate or property manager in some areas through which real property income comes to the firm as follows
Arbitrator: The property manager serves as an arbitrator between two parties over land matters. He can as well arbitrate between the government and the civil society
Feasibility and viability appraisal: The property manager gives his professional advice to a proponent and a prospective investor over a proposed investment venture on the profitability, suitability, sustainability of the project including the strength, weakness, opportunities and threats that are liable to occur or inherent on the proposed investment ventures. Therefore, feasibility and viability appraisal is the job of the estate manager.
Other land related matters: The property manager oversees the matters that are related to land, in giving professional advice and consultancy in compulsory acquisition and compensation, appraisals, property development processes and so on.
2.1.4 Introduction to Estate accounts
It is the duty of the property manager to keep property record of inflow and outflow of cash on the property that he is managing.
Basically, accounts are produced with the object of showing two things: first, the profit or loss (income and expenditure) of a business over a given period and, secondly, the net worth of a business at a stated moment in time. The net worth of a business is the excess of its assets over its liabilities, while its profit is the excess of its income over its expenditure, (Olusegun, 2011).
2.1.5 Professional basis for Estate Accounting
Section II of the rules and regulations for the practice of Estate surveying and valuation in Nigeria stipulates that every Estate surveyor and valuer shall:-
a. Keep in one or more bank accounts, separate from his own, his firm or his company’s bank account (as the case may be) any money or his company in any capacity other than that of beneficial owner.
b. Accounts at the due time for any moneys held as aforesaid (less any agreed deductions there from) to the parties entitled to this section of the code of conduct forms the professional basis of Estate accounting
In a large property organizations, it is necessary that an accounts department headed by a qualified accountant be made to handle these activities, (Olusegun, 2011).
a. Bank Accounts
The Nigeria Institution of Estate surveyors and valuers in its discharge of monitoring functions have mandated all practicing valuers to open and operate two distinct book of accounts.
These accounts can be operated at various banks for the purpose of diversifying risks of a bank becoming insolvent.
(i) Company/partnership account
(ii) Client’s account.
(i) Company/partnership account
This account shall be operated by an Estate Surveyor and valuer for the purpose of making cash lodgements or transfers pertaining to professional fees payable and income due to the company in the course of its discharge of official duties. Dividend payments as well as interest payments for shares and bonds purchased by the company can be lodged into this account. Commissions for agency services, management fees, and fees for the conduct of valuation/appraisals are also lodged in this account.
(ii) Clients’ Account
A practicing Estate Surveyor and valuer is expected to open a separate account where clients’ monies are lodged prior to rendering of accounts to beneficiaries concerned. Cash lodgements appropriate to this account include rent payable by tenants, refund of monies by contractors, cash realized from the sale of properties, and other transaction in favour of the client. It is expected that the surveyor deducts his professional fees in respect of sales and letting made in favour of clients before he credits that account. Even when the account is credited, before the surveyor charges his fee, he must make the deduction before rendering the account to his client.
2.1.6 Importance of Estate Accounts
According to Olayonwa (2001) it is important that Estate surveyors keep adequate records of the books of accounts of an estate, which include
Estate Accounts, when properly kept enable the property manager and owner to know the financial state of the Estate business, wise documentation of financial accounts is indeed the panacea to perennial problems of estate management such as immediate solvency and the need to steer the estate towards its long-term investment potentials.
Estate Accounts is important to a property manager/property company because the complications of taxation do call for the maintenance of detailed records of receipts and payments on both revenue and capital accounts.
The maintenance of detailed estate accounts is important to Real Estate organization because the arrangement of figures and their support with adequate balance sheet is an exercise in management which affords the opportunity for an appraisal of the enterprise as a whole and of the various subsidiaries. Hence, a three-year balance sheet for instance, provides at a glance the financial performance of a property company.
The maintenance of Estate accounts paves the way for subsequent financial and capital market transaction for property companies. For instance, the securities and exchange commission of Nigeria requires all companies wishing to sell their shares to the public to avail it with at least three-year books of accounts comprising profit and loss accounts and balance sheets. Similarly, property development companies wishing to enjoy partnership arrangement for the funding of development projects are required by commercial banks to submit three-year books of account.
The maintenance and operation of Estate Account help to minimize/eliminate the incidence of financial crimes and fraud in an Estate organization. Surveyors should be aware that their clients also keep accounts and actually know what to expect as their income/remittance. Similarly detailed accounts in an organization also enable the detection of fraud and correction of all anomalies connected therewith.
2.1.7 Various Types of Estate Accounts and Records
Ebisike (2010) identified the books of accounts peculiar to Real Estate business and also been kept by property managers as follows:
1. CASH BOOK.
(a) Rent register.
(b) Service charge register.
2. EXPANDED CASH BOOKS AND RECORDS.
(a) Rent receipt chart (field file).
(b) Service charge receipt chart.
(c) General rent and service charge chart.
(d) Rent and service charge schedule for unexpired leases.
(e) Rent and service charge schedule for expired leases.
(f) Schedule of vacant properties/lettable space.
3. LEDGER
4. JOURNAL
5. TRIAL BALANCE
6. ESTATE INCOME AND EXPENDITURE ACCOUNT/PROFIT AND LOSS ACCOUNT.
7. SUMMARY OF CAPITAL TRANSACTIONS
8. BALANCE SHEET
1. Cash Book
The first essential of a system of estate accounts is a large and adequate cash book with columns for cash in hand, cash at bank and details. This book of account is the gateway for every form of transaction in a property firm. In a real estate organization, there are two specialized cash books. The first being rent register (rent book) which is used to document rent paid at a given point in time as well as particulars of the person(s) making such payment.
Secondly, the service charge payments made by tenants in a multi-tenanted property held on internal repairing and insuring leases, (Olusegun, 2011). The separation of rent book from service charge register is imperative because service charge accounts are managed separately from rent accounts. The cash book forms the basis for issuance of payment receipts as it also includes receipt number.
2. Expanded cash books and records
In addition to the conventions cash book, meticulous surveyors keep myriads of expanded and customized cash books and records.
(a) Rent receipt chart
Displayed in Table 1,. This chart can be extracted from the rent register and office copies of rent receipt issued to tenants during the property management year. This accounting data forms the basis for the determination of actual estate income in the accounting year.
(b) Service charge receipt chart
Displayed in Table 2,. This chart can extracted from the service charge register and office copies of service charge receipts issued to tenants during the basis for the determination of actual amounts collected as service charge from tenants in a property management year.
Table 1: Rent receipt chart for Ikechi shopping plaza as at 31/08/2014
S/N
Receipt No
Shop No
Net space (m2)
Period of lease
Rent payable (N p.a.)
Actual rent paid (N)
Deficit of rent paid (N)
Arrears of rent paid
(N)
Total rent due
(N)
Remarks
1
A.15831
1
16
02/06/14
01/06/15
90,000
90,000
0
0
0
2
A.15837
2
16
19/05/14
18/06/15
90,000
180,000
0
0
0
2yr rent
3
A.15972
3
16
19/05/15
18/05/15
90,000
90,000
0
0
0
4
A.15975
4
16
08/04/14
07/04/15
90,000
90,000
0
0
5
A.15979
5
16
01/05/14
30/04/15
90,000
75,000
15,000
5,000
20,000
6
A.15983
6
18
06/06/14
05/06/15
105,000
105,000
0
0
0
7
A.15989
7
18
16/03/14
15/03/15
105,000
210,000
0
0
0
2yr rent
8
A.15987
8
18
06/03/14
05/03/16
105,000
105,000
0
0
0
TOTAL
945,000
15,000
5,000
20,000
SOURCE: Ataguba (2012)
TABLE 2: Service charge chart for Ikechi shopping plaza as at 31/08/2014
S/N
Receipt No
Shop No
Net space (M2)
Period of lease
Service charge payment (N Pa)
Actual service charge paid (N p.a)
Deficit of s.charge (N)
Arrears service charge paid (N)
Total service charge due (N)
Remarks
1
B.1286
1
16
02/06/14
07/06/15
22,500
22,5000
0
0
0
2
B.1293
2
16
19/05/14
18/05/16
22,500
45,000
0
0
0
2yr service charge
3
B.1343
3
16
19/04/14
18/05/15
22,500
22,500
0
0
0
4
B.1351
4
16
08/04/14
07/04/15
22,500
22,500
0
0
0
5
B.1356
5
16
07/05/14
30/04/15
22,5000
20,000
2,500
1,500
4,000
6
B.1373
6
18
06/06/14
03/06/15
26,250
26,250
0
0
0
7
B.1378
7
18
16/03/14
15/03/15
26,250
52,500
0
0
0
2yr service charge
8
B.1393
8
18
06/03/14
05/03/16
26,250
26,250
0
0
0
TOTAL
SOURCE: Ataguba (2012)
(c) General rent and service charge chart
This provides details of leases, rent and service charge status of each tenant at any given point in time (Table 3). Inasmuch as service charge account is managed separately from rent account, Estate firm may deem it necessary to include service charges in this chart in order to indicate the total amount payable for leasing properties comprising rents and service charges respectively.
Table3: General Rent and service charge chart for Elin Plaza as at 31st June 2012
S/N
Tenants
Shop No
Net space (m2)
Amount Payable per annum
Period of lease
Actual amount paid
Arrears (N)
Remarks
Rent
Service charge
Total
Start dd/mm/yy
End dd/mm/yy
Rent
Service charge
Total
1.
Mr. Adebayo Gbenga
101
14
80,000. 00
20,000. 00
100,000. 00
14/08/14
13/06/15
80,000. 00
20,000. 00
100,000. 00
0
Unexpired
2.
Mr. Pincewill Dokubo
102
14
80,000. 00
20,000. 00
100,000. 00
11/05/14
10/05/15
80,000. 00
20,000. 00
100,000. 00
0
Unexpired
3.
Mall . Sambo Ahmed
103
14
80,000. 00
20,000. 00
100,000. 00
03/06/13
02/06/15
80,000. 00
20,000. 00
100,000. 00
100,000. 00
Expired
4.
Mall. Sambo Ahmed
104
16
92,000. 00
32,000. 00
115,000. 00
-
-
-
-
-
-
Vacant
5.
Mrs. Haunah Adeoye
105
16
92,000. 00
23,000. 00
115,000. 00
01/02/14
31/01/15
184,000. 00
23,000. 00
207,000. 00
23,000. 00
Unexpired
6.
Mr. Nebechi Azuka
106
16
92,000. 00
23,000. 00
115,000. 00
21/03/14
20/03/14
92,000. 00
23,000. 00
115,000. 00
0
Unexpired
7.
Mr. Yobo Kwanashe
107
16
92,000. 00
23,000. 00
115,000. 00
18/06/13
07/06/14
92,000. 00
23,000. 00
115,000. 00
115,000. 00
Expired
8.
Alhaji Umar Gwarzo
108
16
92,000. 00
23,000. 00
115,000. 00
10/11/13
09/11/14
92,000. 00
23,000. 00
115,000. 00
0
Unexpired
9.
Alhaji Umar Gwazo
109
18
103,000. 00
25,750. 00
128,750. 00
-
-
-
-
-
-
Vacant
10.
Mr. Torhamba Ichave
110
18
103,000. 00
25,000. 00
128,750. 00
17/04/14
16/04/15
206,000. 00
51,500. 00
257,000. 00
0
Unexpired
906,000. 00
203,500. 00
The total service charge received during the accounting year is to the tune of N203,500. 00 Source: Ataguba (2012)
(d) Rent and service charge schedule for unexpired bases
Extracted from the general rent and service charge chart, it provides a summary of all tenants with unexpired lease at the end of the reporting year.
Debtors Shop No Amount (N)Mall. Sambo Ahmed 103 80,000. 00
Mr. Yabo Kwanashe 107 92,000. 00
Arrears of rent 172, 000. 00
Arrears of rent stood at N172,000. 00 against the new accounting year.(e) Rent and service charge schedule for expired leases basis are due for renewal. Apart from its relevance in preparing income and expenditure statements for estates. The chart is used in generating rent and service charge demand notices.
Debtors Shop No Amount (N)Mall. Sambo Ahmed 103 20,000. 00
Mrs. Hannah Adeoye 105 23,000. 00
Mr. Yobo Kwamashe 107 23,000. 00Arrears of service charge 66,000. 00Arrears of service charge stood at N66,000. 00 against the new accounting year.
(f) Schedule of vacant properties/let table space it is possible that not all shops or offices or residential properties owned by a client may be occupied by a tenant at a given point in time. This report carries the total number of vacant spaces that are lettable and aids proper verification of rents and service charge tied-up in void spaces
3. Ledger
In addition to cash book and its expanded variants, it is pertinent that property managers keep ledgers for nominal accounts, personal accounts and real accounts. Nominal account contain expenditure elements ranging from maintenance and repairs, insurance, management, depreciation, tax and levies, rates, insurances, and other operating costs of an estate. The balance of this account shall be changed to the income and expenditure account at the end of the period. Besides nominal ledgers, two other sets of ledgers have been mentioned, those containing the real and personal accounts, (Olayonwa, 2001) The ledger containing the real account of an estate deals with items (other than cash) which make up the working capital of the estate or property company. (Olusegun, 2011). These include plant and machinery, fixtures and fittings, land and buildings, stock –in- hand, building materials etc.
At the end of the accounting year, the balance of these real accounts will be carried as assets into the estate balance sheet. The personal ledger will be maintained for all transactions are charged on the company’s own money. The balance of the accounts in the personal ledger will be carried to the estate balance sheet at the end of the period, under headings of sundry creditors (Olusegun, 2011).
4. Journal
The use a journal as a book of original entry is to take transactions which cannot go through any other book, for example cash book or the sales and purchases books. From the point of view of estate accounts, however, a journal may be used for the following purposes.
(i) To record all transactions as they take place sorting them out under debit and credit, with the object of preparing the estate accounts from the formal as in when time allow.
(ii) To record inter departmental transfers as they take place, with the object of entering them in the ledger accounts in bulk at the end of the accounting period.
(iii) To take opening and closing entries
5. Trial Balance
Trial balance is that book of account which itemizes all assets, liabilities, and equities of a business entity as well as the income and expenditure elements at the end of an accounting year. The trial balance paves the way for the preparation of profit and loss accounts (income and expenditure accounts).
Table 4: provides a typical structure of trial balance for the preparation of profit and loss accounts and balance sheets are accompanied with working notes for necessary adjustments necessary to enable such accounts to balance in the long run.
Table 4: Trial Balance of Divine Property Development Company as at 31/12/2011
Debt (N’000) Credit (N’000)
Non Current assets
Fixed assets 126,173
Investment properties 20,141,731
Long-term investments 3,301,750
Current Assets
Properties under construction 12,560,319
Stock and work-in-progress 2,173
Debtors 13,408,369
Cash and book balances 1,195,253
Expenditure Items
Cost of sales 1,300,417
Administrative expenses 557,113
Finance charge 1,118,314
Liabilities due within year 13,643,714
Liabilities due after one year 15,395,487
Equity and reserves 27,430,734
Sundry Items
Turn over 6,001,432
Income from other sources 106,001
Profit from disposal of fixed assets 362
62,577,730 62,577,730 rents earned during the period are debited. Essentially this account will show the income and expenditure arising from exercise of ownership rights over an estate of the end of a property management accounting year. Ataguba, (2011).
6. Estate income and Expenditure account
Unlike the profit and loss account which indicates profit/loss, Estate income and expenditure (table 5), indicates (excess of income over expenditure). All rents earned are credited while expenditures from income are debited.
Income and expenditure account for Mazi A. Chekwube’s property portfolio as at December 31st, 2013
Expenditure (N) income (N)Vacancies 2,170,000 potential income for the year 26,460,000
Unpaid rents 916,000
3,086,000
Gross rent received c/d 23,374,000
26,460,000 26,460.00Management fee 2,037,400 Gross rent b/d 23,374,000
Letting fees 300,000 Add Gross rent recovered 1,167,000Property rates 1,168,700
Withholding tax 500,000
Ground rent 64,110
Minor maintence 361,000
Capital improvements 5,110, 000
Security levies 90,000
Insurance 312,516
Landlord’s initial remittance 6,150, 000
Suplus income c/d 8,447,274
24,541,000 24,541,000Surplus income b/d 8,447,274
7. Balance sheet
The final account is the balance sheet listing the assets and liabilities of a business concern. Balance sheet is simply a list of a business’s assets and its liabilities at the end of an accounting year, (Ebisike, 2010). This account is essentially used to monitor the financial performance and condition of a business entity.
2.1.8. Spreadsheet in property management accounting
A spreadsheet is an interactive computer application program for organizing, analysis and storage of data in tabular form. Spreadsheet developed as computerized simulations of paper accounting worksheets. The program operates on data represented as cells of an array, organized in rows and columns. Each cell of an array is a model-view-controller element that may contain either numeric or text data or the results of formulas that automatically calculate and display a value based on the contents of other cells.
Spreadsheets have replaced paper-based system of bookkeeping throughout the business world. Although they were first developed for accounting or bookkeeping tasks, they now are used extensively in any context where tabular lists are built, sorted and shared (Deborah and Charles, 2006).
According to Morley and Parker (2011) a spreadsheet is a group of values and other data organization into rows and columns, similar to the ruled paper worksheets traditionally used by bookkeepers and accountants. Spreadsheet software is the type of application software used to create computerized spreadsheet, which typically contains a great deal of numbers and mathematical calculation. Most spreadsheets include formulas that are used to compute calculations formula result are updated automatically wherever any changes are required, which increase accuracy. In addition, the automatic recalculation of formulas allows individuals to modify spreadsheet data as often as necessary either to create new spreadsheet to experiment with various possible scenarios (called what if analysis). Spreadsheet software typically includes a variety of data analysis tools, as well as the ability to generate charts.
The most widely used spreadsheet today is Microsoft excel
2.1.9. Brief History of spreadsheet
In the realm of accounting jargon a spreadsheet or spreadsheet was and is a large sheet of paper with columns and rows that lays everything out about transactions for a business person to examine. It spreads or shows all of the costs, income, taxes etc. on single sheet of paper for a manager to look at when making a decision (Browne, 1998).
Information systems oral history and some published newspaper stories claim that in 1978 Daniel Bricklin, while a student at the Harvard Business School, invented the first electronic spreadsheet called VisiCalc. That claim is a bit exaggerated (Browne, 1998).
a. Batch spreadsheet report generator
A batch “spreadsheet” is indistinguishable from a batch compiler with added input data, producing an output report, i.e, a 4GL or conventional, non-interative, batch computer program. However this concept of an electronic spreadsheet was outlined in the 1961paper “budgeting models and system simulation” by Richard Mathessich. The subsequent work by Mattessich and its companion volume applied computerized spreadsheets to accounting and budgeting systems (on mainframe computers programmed in FORTRAN IV. These batch spreadsheets dealt primarily with the addition or subtraction of entire columns or rows (of input variables), rather than individual cells (Browne, 1998).
b. VisiCalc
Because of Dan Bricklin and Bob Franskston’s implementation of VisiCalc on the Apple II in 19 and the IBM PC in 1981, the spreadsheet concept becomes widely in the late 1970s and early 1980s. VisiCalc was the first spreadsheet and combined all essential features of modern spreadsheet applications (except for forward referencing, natural order recalculation such as WYSIWYG interactive user interface automatic recalculation, status and formula lines, range copying with relative and absolute references, formula building by selecting referenced cells, (Browne, 1998).
c. Lotus 1-2-3 and other MS-Dos Spreadsheet
The acceptance of the IBM PC following its introduction in August, 1981, began slowly because most of the programs available for it were translations from other computer models. Things changed dramatically with the introduction of lotus 1-2-3 in November, 1982 and released for sale in January, 1983. Lotus 1-2-3, along with its competitor Borland Quattro, soon displaced VisiCalc. Lotus 1-2-3 was released on January 26, 1983, starting outselling then most popular VisiCalc the very same year, and for a number of years was the leading spreadsheet (Claymon, 1999).
d. Microsoft Excel
The next milestone was the Microsoft Excel spreadsheet. Excel was originally written for the 512K Macintosh in 1984 – 1985. It was one of the first spreadsheet to use a graphical interface with pull down menus and a point and click capability using a mouse pointing device. The Excel spreadsheet with a graphical user interface was easier to use for most people the line interface of PC-DOS spreadsheet products (Browne, 1998).
Microsoft released the first version of excel for the macintosh on September 30, 1985,and then ported it to widows, with the first version being numbered 2.05 (to synchronize with the macintosh version 2.2) and released in November 1987. The windows 3.X platforms of the early 1990s made it possible for excel to take market share from lotus. By the time lotus responded with useable windows products, Microsoft had begun to assemble their office suite. By 1995, Excel was the market leader, edging out lotus 1-2-3 and in 2003 IBM discontinued lotus 1-2-3 altogether (Harvey 2006)
Microsoft Excel is a spreadsheet application developed by Microsoft for Microsoft windows, MAC OS, and IOS. It features calculation, graphics tools, pivot tables and a macro programming language called visual basic for application. It has been a very widely applied spreadsheet for these platforms, especially since version 5 in 1993, and it has replaced lotus 1-2-3 as the industry standard for spreadsheets. Excel forms part of Microsoft office (Debora and Charles, 2011).
2.1.10. Weakness and strength of Microsoft Excel
i. Vulnerable to fraud
Of all the spreadsheet weaknesses, this is perhaps the most damaging. Fraudulent manipulations in company excel files have already resulted in Billion-Dollar losses. The main underlying reason behind this spreadsheet vulnerability is the inherent lack of controls, which makes it so easy to alter formulas, values, or dependencies without being detected.
ii. Susceptible to human errors
While fraud will always be a threat to spreadsheet systems, there is a more significant threat that should make you seriously consider getting rid of these outdated systems. And that is its extreme susceptibility to even trivial human errors. Missed negative signs and misaligned rows may sound harmless.
iii. Difficult to troubleshoot or test
It’s not uncommon to have interrelated spreadsheet data scattered across different folders, workstations, offices, or even geographical locations.
Worse, even if you are able to pinpoint the location of every related file, tracing the logic of formulas form one related cell to another can take ages. It’s pretty obvious now how you’ll also encounter a similar problem when troubleshooting questionable data.
iv. Unfit for agile business practice
We’re now in an age when major changes are shaping and reshaping the business landscape. Mergers, and acquisitions, management but outs, earthquakes, tsunamis, hurricanes, uprising, climate changes, it could easily be left behind or even face extinction.
Spreadsheets are normally created by individual who have not the slightest know-how regarding software documentation. So when its time for a new person to take over as a part of a large scale business change the newcomer may have to start from scratch.
v. Not designed for collaborative work
Planning, forecasting, budgeting and reporting are all collaborative activities in other words; plans, forecasts, budgets, and report typically require information form different departments. In addition, the final documents are a result of multiple exchanges of data, ideas and files.
If a company’s offices are scattered through out the country or if certain team members are separated by large distances, the only way to exchange data stored in spreadsheet is through email.
Experience will tell you that such a method of exchange is susceptible to duplicate and even erroneous data.
vi. Scales poorly
As an organization grows, data in spreadsheet-based system get more distributed, subsequently compounding the issues outlined above. It is absolutely not advisable for a large organization to keep using spreadsheets.
Furthermore, using a spreadsheet rather than a calculator or pen and paper offers the following advantages
i. More effective data handling
Formulae can be use to instantly recalculate totals. For example, if the builder changed his call-out charge, the total cost would be instantly recalculated taking the change into account. Therefore, it is easy to make these changes save your work and print it out again.
ii. More flexible presentation
After column widths and easily delete or add columns and rows. Underline, embolden text and use different fonts and graphics. Justify your data to the left, center or right. Control the type numbers you enter – for example you can choose percentage, currency or set the number of decimal places.
iii. What if” questions can be asked without rebuilding a model from scratch each time a test is run.
iv. Automatic recalculation: if a change is made then all related formulae and value change.
v. Graphics can be produced: values are charged on the graph as any other values changes.
vi. Variables and constants can be used: the entire model can be changed be changing one value.
vii. The model can be changed and backed up if the original becomes lost and corrupted. There will be a spare copy.
viii. It might be cheaper and quicker to build a computer model than a physical model.
ix. It’s a lot safer to run a simulation under extreme conditions that to build the actual model and test it.
2.2 conceptual frameworks
Rental Accounts
Service charge accounts
Spreadsheet
-Estate income and expenditure -Service charge income
-Rent receipt account -Service charge expenditure
-Rent Remmitance
SOURCE:- Field study (2015)
The diagram above is a group of concept that broadly defined and systematically organized to provide focus, a rationale and a tool for the integration and interpretation of information
Manual property management accounting: these include all the bookkeeping process that are documented in a paper worksheet, this compilation features every business and monetary transactions conducted by the property manager and documented in a paper sheet. This records incorporates rental account and service charge accounts.
Rental accounts: this refer to the field file that contains the records of the payments made on each property by individual tenants and properly documented in reference to the commencement and expiration of rents
Service charge accounts: in the attempt to maintain the service on the property like security, waste disposal etc. a separate account referred to as service charge account is opened for the tenants in order to record any financial transaction that was made on that respect.
Thus, this account will include both estate income and expenditure accounts, rent receipt account, including rent remittance. Also service charge income (payment), service charge expenditure will all be computed and calculated using Microsoft excel type of spreadsheet.
2.3 Summary of literature review
Summarily, every investment property requires proficient property management accounting. A property manager manages the property in the most efficient and economic way possible in order to protect and maintain the owners investment and must adhere to a strict code of ethics and standard of business practice (Olusegun et,al, 2011).
Ebisike (2010) noted that the service rendered by a property manager free the owner from the detailed work such as preparation of accounting records screening tenants, organizing and supervising repairs and maintenance and purchasing suppliers. The property manager also provides expertise in the technical and operational areas where an owner may not be qualified.
In respect to all the reviewed literatures and shared knowledge above, a property managers responsibility often include performance and coordination of :
i. Screening and selecting suitable tenants
ii. Establishing rental structure
iii. Negotiating leases and tenancy agreement
iv. Collecting rents
v. Ensuring lease compliance
vi. Supervising the maintenance of the lands and buildings
vii. Developing preventive maintenance programs
viii. Purchasing supplies or service as required
ix. Preparing and recommending operating budgets
x. Maintaining proper accounts reporting of all income and expenditure
xi. Maintaining good tenants relations
Moreover, the aim of every property manager in property management is maintaining proper accounts and reporting of all income and expenditure, Olayonwa (2000). But with the advent of spreadsheet and its versatile application within the micro-computer environment, efficiency and time economy is achieved and also makes the work less cumbersome. Unlike traditional bookkeeping.
Harvey (2007) observed that maintaining the worksheet spreadsheet is demanding in terms of competence, accuracy, speed and readjustment because a single error in any row of the Microsoft Excel spreadsheet will mean disaster to the whole job.
CHAPTER THREE
3.1 RESEARCH DESIGN
In relation to the aim of this research which is to evaluate the advantages and limitation in the use of spreadsheet for property management accounting which captures the types of property management accounting records kept by property managers, a number of material and methods shall be deployed – first, I will acknowledge that this design research depends on experimental study of property management accounting of selected estate management firm in Lokoja, Kogi state. For the experimental study
3.2 SOURCES OF DATA
With regards to study, data sources include primary and secondary sources. Further more qualitative data were harnessed for the research.
(a) Qualitative data types
This type of data comprises of physical observation to accumulate local knowledge. It involves the perception, attitudes and motivation of the study of estate firms, with respect to the type of property management accounting record they keep in relation to the aim of evaluating the advantages and limitations in the use of Microsoft excel for punctuating records.
(b) Quantitative data types
This data type comprises of numerical instances of records been kept for property management accounting as obtained from the experimental design of interview in the course of fieldwork. The essence of this data type is to provide quantitative relevance to content of property management accounting.
3.3 DATA COLLECTION TECHNIQUES
The technique for the collection of data for this research work will be through obtaining the format for accounting records in the estate firm and through a semi-structured interview in the form of an open ended question that will be administered to the property managers.
3.4 SYSTEM REQUIREMENT
Just like any property management accounting system, which is aimed at identifying, measuring, recording, classifying, summarizing and communicating financial transactions and events (Ebisike 2010), the conceptual design of property management accounting records using Microsoft excel has been carefully done to accommodate these issues.
3.4.1 Hardward requirement
The following constitutes hardware requirements for this design research.
(1) Selection of desktop computer or laptop with at least intel dual processor of 1.8GHZ clock speed, 160 GH hard drive s pace, 2-4 GB RAM, DVD RW and windows 7 operating system
(2) Associated peripheral or output device such as monitor, keyboard and mouse, UPS and Scanner (optional)
3.4.2 Software Requirement
The following software package that shall be used in the property management accounting in estate firm.
(i) Microsoft excel 2003, 2007 and 2010
This software will be installed in the computer by the property manager.
3.5 TECHNIQUES FOR DATA PRESENTATION AND ANALYSIS
Noteable among the techniques which will be deployed for this research include screen dumps of worked examples of an income and expenditure accounts record, and rent and service charge accounts records using Microsoft excel software.
CHAPTER FOUR
4.0 DATA PRESENTATION AND ANALYSIS
4.1 DATA PRESENTATION
In chapter three above, I explained in details the method of data collection technique, and data collection breakdown. Under this heading, the research will be looking at how data collected are presented and analysed experimentally with the use of a spreadsheet (Microsoft Excel) to arrive at a given result.
Fig 1: Screen dump showing rent and service charge schedule on Microsoft Excel
As we can see in this screen dump above, it is the rent and service charge of an existing estate firm account record.
Analysis: This rent and service charge account schedule was created using Microsoft Excel 2003. It features the name of each individual tenant, the amount paid for their rent and service charge each, the commencement and expiration of their rent and service charges including essential remarks. This was created from an existing estate firm accounting record collected from the study are.
Fig. 2: Screen dump showing the income and expenditure account schedule using Microsoft Excel
As we can see in this screen dump above, it is the income and expenditure account of an already existing estate firm account record.
Analysis: This income and expenditures accounts schedule was created using Microsoft Excel 2003. It features the income and expenditure accounts records of an existing estate firm for the whole year.
Formular audit: The screen dump represent the formular audit of the income and expenditure accounts the essence of it is to enable the property manager to detect any change in the variables which may lead to discrepancy in the accounts records generally. i.e. it is like a source base to the income and expenditure account record.Fig. 3: Formular audit showing estate income and expenditure account.
Analysis: The formular audit system helps the user to detect human errors that may arise in the computation of the final result presentation.
4.3 DISCUSSION OF RESULTS
The discussion of the results in the data presentation and analysis is geared towards outlining the weakness and strengths that were discovered when carrying out the experimental research of the use of Microsoft Excel to carryout property management accounting:
Weakness include:
(a) Vulnerability and lack of controls, which makes it easy to alter either formulars, values or dependencies without being detected.
(b) Susceptible to trivial human errors, like use of signs on the rows.
(c) Sometimes it is difficult to trace and discover where mistakes arise from.
(d) It demands on Ms Excel know-how to be able to operate and also a newcomer may have to start from the scratch in order to understand and operate.
The strengths observed while carrying out this experimental research work are:
(a) More effective data handling, for recalculations and taking the change into account.
(b) More flexible presentation as column widths can be easily merged, delete or added. Also you can be able to choose percentage, currency or set the number of decimal places.
(c) Scenarios (i.e. “what if) can be asked without rebuilding the computation from the scratch
(d) All the information and records can be backed up and changed if the original became lost and corrupted.
(e) It is a lot safer and easier to run a simulation under extreme conditions.
(f) It is cheaper to build and saves time than the physical traditional bookkeeping.
(g) Variable and numbers can be changed by just changing one value for easier correction.
(h) Automatic recalculation is effected once the formulae or value is changed.
CHAPTER FIVE
SUMMARY OF FINDINGS, RECOMMENDATIONS, AND CONCLUSION
This chapter presents a general review of the research work. It gives the summary of the result findings obtained in order to make necessary and reasonable recommendation on the use of spreadsheet for property management accounting in estate firms. Also, areas of further research will be stated and suitable conclusion will be drawn.
5.1 SUMMARY OF FINDINGS
Based on the data gathered from the experimental study and secondary sources of this research work, the following findings were obtained.
(i) The advantages of using spreadsheets in the micro computer environment outweighs its limitations.
(ii) The use of spreadsheet in the micro computer environment tends to bring property management accounting closer to the property manager than manual bookkeeping.
(iii) The use of electronic spreadsheet (Ms Excel) will help the manager to back up his work and have a spare record even though the original record gets lost.
(iv) Using Ms Excel as a spreadsheet for recording property management accounting will demand that the property manager get acquainted with the use of information technology tools, which will demand time and finances.
(v) The use of spreadsheet for recording property management accounting will save time, energy and the cumbersomeness of using manual bookkeeping, as the manager will have to keep a lot of documented paper work.
(vi) At the advent of any fire outbreak, all stored paper records will be lost.
5.2 RECOMMENDATIONS
In view of the analysis and findings, it has become imperative to suggest the best approach in carrying out property management accounting. Thus, the following recommendations has been made.
(i) Property managers should show willingness in the use of spreadsheet.
(ii) Use of computer application spreadsheet should be a trend for performing property management accounting in all estate firms.
(iii) property management accounting requires a proper documentation of records for reference purposes therefore the use of spreadsheet in the computer environment should be encouraged.
(iv) In this emerging time that ICT has taken over almost every aspect of management, incorporating into property management accounting is ideal for all property managers.
(v) the use of spreadsheet in the computer environment makes the accounting job of the manager easy and proficient. Therefore, it is worth applying.
5.3 AREA OF FURTHER RESEARCH
The researcher recommend that the establishment of a property management system database structure should be researched into.
5.4 CONCLUSION
The quality and sustainability of an ICT based property management accounting is second to none. And as such, the researcher is of the view that it will help to eradicate common manual accounting and bookkeeping errors. Preserve the records for posterity and also help both the property manager and the client in reviewing their accounting records in a grasp and which can be stored for a number of years to come, especially in the database.
Conclusively, implementation of the recommendation made above will help property managers to ensure a proper records of rent and service charge, income and expenditure accounts; it will ensure competence and will foster the knowledge of information technology towards the management of property accounts.
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