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I'm trying to help out a friend with their bookkeeping for a real estate investment they just purchased. I'm pretty sure I have categorized all the closing expenses properly except for one thing. The bank messed up some things during the closing process and then mailed a check a week or two after closing to apologize. How would one categorize this transaction (e.g. revenue, a negative expense)? My friend is in TX, USA.

Rich
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2 Answers2

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It might be an indemnity depending on your jurisdiction (that you don't state at the time of this writing).

From investopedia:

Indemnity is compensation for damages or loss.

So the bank probably caused a loss (of time, etc) to your friend, and compensated with that check.

You should check with an accountant if Indemnity is taxed differently from other sources of income, or not.

Mindwin Remember Monica
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I believe that any corrections would be a negative expense as it was a honest mistake by the bank provided the jurisdiction was the United States.

Morrison Chang
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