Q: As the lessor: how do I account for an “option to purchase” payment in QuickBooks?
A: Here’s how option to purchase works. The buyer or lessee puts down money to purchase the option to buy the property later. The buyer and seller may agree to a purchase price when putting the money down or evaluate the market value at that time. Often times, buyers prefer to lock in the price. The term is negotiable and no one can purchase the property in that time period. Even if the buyer does not buy the property, the option to purchase payment is typically not refundable. A portion of the monthly rent payment is applied towards the purchase price.
In QuickBooks I would create a liability account for the “option to purchase” properties. Receive payments against that account.