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ACCOUNTING FOR NON-ACCOUNTANTS

BUSINESS ORGANIZATION STRUCTURE


Single Proprietorship (registration Department of Trade and Industry)
Partnership (registration Securities and Exchange Commission)
Corporation (registration Securities and Exchange Commission)
ACCOUNTING TERMS
The Financial Statements
Balance Sheet - a financial report as of a given date that reflects the assets,
liabilities and capital (equity) of a business enterprise
Income Statement a financial report for a given period of time that
summarizes the revenues and expenses of a business enterprise. When revenue is
greater than expenses, the resulting difference is called a Net Profit or Net Income.
When expenses are greater than revenue, the resulting difference is called a Net
Loss
Cash Flow Statement a financial report that summarizes the cash movement
of a business enterprise in terms of operation, financing and investing.

The Accounting Equation


Asset = Liabilities + Capital
Debit represents increase in assets, decrease in liabilities and equity (capital)
Credit represents decrease in assets, increase in liabilities and increase in
equity

The Account or Account Title a term used to record the financial transaction of
a business
1. Real Accounts accounts under the Balance Sheet. These accounts are not
being closed at the end of an accounting period
Assets tangible or intangible items owned and controlled by a business
enterprise and used to generate business benefits

Current Assets those that are being used in the normal operating
activities of a business and which are readily convertible to cash
Cash
Accounts Receivable
(Allowance for Bad Debts)
Prepaid Expenses
Notes Receivable
Inventories
Office Supplies
Marketable Securities
Non-Current Assets or Fixed Assets also known as long-lived assets
that will give future benefit to the business . These are also capital expenditures
(Land, Building, Office Equipment, Vehicles, Furniture and Fixtures)
Land
Building
(Accumulated Depreciation)
Furniture and Fixtures
(Accumulated Depreciation)
Office Equipment
(Accumulated Depreciation)
Transport Vehicles
(Accumulated Depreciation)
Other Assets not classified as Current nor Fixed Assets
Investments (Bonds)
(note: Contra-Assets any allowance that reduces the asset account such as
Accumulated depreciation, Allowance for bad debts

Liabilities debts or obligations of a business enterprise


Current Liabilities debts or obligations that must be paid within a year
Accounts Payable debts for goods and services received
Accrued Expenses expenses incurred but not yet paid (such as utility bills)
Unearned Income - advances by customers or fee received but not yet
earned
Long-term liabilities (current portion) portion of a long-term liability that is
due within the year
Long-term liabilities debt or obligations, settlement of which is over one year
(bank loan, mortgage payable, notes payable)

Equity (capital) or Net Assets (Assets minus liabilities) it is the owners


net interest in the business assets.
If single proprietorship/partnership:
Capital, Juan dela Cruz
Withdrawal, Juan dela Cruz
If corporation:
Authorized Capital Stock total number of shares of stock multiplied by the
par value approved by
Security and Exchange Commission. The authorized capital stock may be
broken down into
Preferred and Common shares of stocks
Subscribed Shares of Stocks amount of stocks that were contracted to be
paid
Subscription receivable portion of the Subscribed Shares of Stocks that are
not yet paid
Paid-up capital the total amount of Subscribed shares of stocks that is fully
paid
Preferred Stock shares that has priority in the dividend and assets of a
corporation. Shareholders
has no voting rights
Common Stock shareholders are entitled to vote and right to subscribe for
additional shares
Retained Earnings the accumulated earnings of a corporation that are not
yet distributed as
dividends . A negative Retained Earnings might mean that the
corporation is incurring loss.

2. Nominal or Temporary Account accounts under the income statement


(revenue and expenses). These are being closed at the end of an accounting
period (usually year end)
Revenues sales or service fees/commission collected
Operating expenses expenses incurred in the ordinary operation of
the business
Salaries and Wages
Marketing
Depreciation
Office supplies
Insurance

Utilities
Bad Debts
Representation
Transportation
Travel
Miscellaneous
(note: Capital Expenses (expenditures) expense incurred that is assumed and
projected to give benefit to a business over a given period of time (over one year).
3. Profit and Loss (Revenue and Expense Summary ) account being used to
close nominal accounts
The Books of Accounts
Journal (General) is a book of original entry. It is here where the asset, liability
and capital are recorded for the first time
Sales Journal a book to record revenues (fees)
Disbursement Journal a book to record expenditures
Cash Journal a book that records both cash revenue and expenditures (used in
cash method of accounting)
Ledger is a book of final entry . This is where the journal accounts are being
posted and summarized
(note: T account- a method used to summarized the entries posted in the books
of accounts)

ACCOUNTING ASSUMPTIONS
1.

Accrual records the financial transactions in the financial statements even


if there is no cash payment or cash receipt. It also means that Revenue is
already recognized if already earned even when there is no cash received yet
and expenses are recognized even if not yet paid

2. Cash records the normal operating financial transactions in the financial


statements on cash basis

TRANSACTION RECORDING FLOW CHART


CASH RECEIPTS
Cash Receipt
journal

LEDGER

T ACCOUNT

LEDGER

T ACCOUNT

Official Receipt
EXPENSES

Disbursement

journal
Cash Voucher
WORKSHEET (WORKING PAPER FOR FINANCIAL STATEMENTS)

T accounts

WORKSHEET

FINANCIAL
STATEMENTS

JUAN DELA CRUZ, REAL ESTATE


BROKER
Balance Sheet
December 31,
2014

JUAN DELA CRUZ, REAL


ESTATE BROKER
Income Statement
For the year ending December
31, 2014

ASSETS
Current Assets
Cash
Advances to
Salespersons
Total current
assets
Fixed Assets
Land
Builiding
Accum.
Depreciation
Tripping Vehicle
Accum.
Depreciation
Total non-current
asset
Total Assets
Liabilities
Current Liability
Utilities

Professional fees
Operating Expenses
Salaries
Tripping Expenses
Marketing expenses
Depreciation
Communication
Supples
Rent
Utilities
Miscellaneous
Net Income

Non-Current Liability
Bank loan
Owner's Equity, Juan dela Cruz
Withdrawal, Juan dela Cruz
Net Income
Owner's Equity, Juan dela Cruz
Total Liabilities and Owner's Equity

PROFITABILITY
RATIOS
Net Profit
(or net return on
sales)

Profit after taxes


Sales

LIQUIDITY RATIOS
FORMULA

Current Ratio

Quick Ratio
(acid test ratio)

Current Assets
Current Liabilities

Current Assets-inventory
Current Liabilities

INDICATION
the firm's ability to meet it's
current
financial liabilities

The firm's ability to pay-off


short-term
obligations without relying on
sales of
inventory

Leverage Ratios

Debt-to-assets

Total debt
Total Assets

Total borrowed funds as a


percentage
of total assets

CASE STUDY
The ledger accounts of Juan dela Cruz for the year ending
December 31, 2014
have the following
balances:
DEBIT
CREDIT

Cash

47,000.0
0

Advances to
salespersons

250,000.
00

Tripping Vehicle

400,000.
00

Accumulated
Depreciation

50,000.0
0

Accounts Payable Utilities

12,000.0
0

Bank loan
Juan dela Cruz, Capital

240,000.
00

638,000.
00
Juan dela Cruz,
Withdrawal

200,000.
00

Salaries and
wages

250,000.
00

Tripping
Expense

20,000.0
0

Marketing
Expense

300,000.
00

Depreciation

50,000.0
0

Communication

30,000.0
0

Office Supplies

5,000.00

Rent

60,000.0
0

Utilities

25,000.0
0

Miscellaneous

3,000.00

1. Prepare Trial Balance


2. Prepare Balance Sheet and Income
Statement
3. Compute Current
Ratio
4. Compute Leverage
Ratio
REAL ESTATE APPRAISAL

Appraisal is an ESTIMATE or OPINION OF VALUE, usually transmitted in writing,


of a certain and adequately described property, as of specified date, supported by a
presentation and analysis of relevant and factual data.
Purposes of appraisal
1. Loans

2.
3.
4.
5.
6.
7.
8.

Insurance
Sale
Tax assessment
Zonal valuation
Merger and consolidation
Liquidation
Joint venture

THREE APPROACHES TO VALUE


1. Market Data or Sales Comparison approach
2. Income Approach
3. Cost Approach
Market Data Approach
Based on the PRINCIPLE OF SUBSTITUTION. The basis being that no prudent
buyer will buy or rent a given property more than what it will cost him to buy or rent
a comparable property
It involves analyzing the sales of other similar properties (called comparables). Also
known as sales comparison approach, market analysis approach or market
comparison approach.

Sample Problem:
1. Mr. John wants to sell a parcel of land he inherited from his parents to
invest in the money market. It is a corner lot and has a good view of Taal
lake, but a portion of the land thereof slopes down slightly. The lot is 600
square meter and the prevailing market price in the area is P2,500 per
sqm. He asked you how much he could sell the property. What price
would you recommend given the following data: A corner influence at
30%; topography disadvantaged at 10% and a plottage advantage at 20%
a. After 5 years the fair market value of the land owned by Mr. Sy is P45M. If
the appreciation value is 1/8 of the value before adjustment, compute the
following:
a. Value before adjustment
b. Appreciation value
c. Appreciation rate

Income Approach (Income capitalization approach)

The PRINCIPLE OF ANTICPATION is the basic premise in this approach because


value is based on the present worth of the future potential benefits of the property.
This method converts the income of a property into an estimate of its value.
The mechanics of Income Approach involves the following steps:
1.
2.
3.
4.
5.
6.

Analysis of the gross income of the property (past, present and future)
Forecast of the operating expenses
Analysis of the past and current operating expense
Computation of the projected net income
Select and justify a capitalization rate
Provide for the recapture of the capital investment on the building
investment

Capitalization rate similar to rate of return


Recapture of the capital investment return of the principal in a property
expressed in peso amount over a period of time
Net Operating Income (I) / Capitalization rate (or ROI)
Case 1: Estimated value can be determined by the following steps:
Net Operating Income (I) / Capitalization rate (or ROI)
1. estimating the net operating income
2. Determining the capitalization rate
3. Applying the income approach formula
How to estimate a net operating income(rental properties)
1.

Estimated income and expenses must be in annual figure


Potential Gross Income is the income that the building generates when rented
100% occupancy at market rent or lease rent. It also includes income from
all sources such as parking, billboards, etc.
Market rent is the rent that is normally charged for that kind of rent in
the market
Lease rent is also known as scheduled or contract rent

2.

Subtract a vacancy and collection loss figure from potential gross income
This number which is usually in percentage is the appraisers estimate from
the market in the local area and reflects normal loss of income caused by
non-payment of rent and periodic vacancies.

Additional income like parking and ad boards is added at this point to arrive
at effective gross income
3. Estimate all building/rental expenses and subtract them from effective gross
income.
a. Fixed expenses that dont change with the occupancy of the building
like property tax and insurance.
b. Variable operating expenses some of which may vary with the
occupancy of the building
c. Reserves sometimes called replacement fund set aside for items that
have to be periodically replaced but not on annual basis such as lights,
stoves
(note: expenses dont include depreciation)
4.

Subtract the estimated expenses from the effective gross income.

5. Choose the capitalization rate (ROI) desired


6. Apply the formula of Income approach to estimate the value
Sample questions:
1. An apartment is being sold at 5,000,000.00. The projected annual rental for the
apartment is at P500,000.00 annually with a vacancy rate of 10%. The total
operating expenses is estimated at P50,000.00 per annum. If the buyer desires a
capitalization rate of 10%, at how much would the buyer purchase the property?
2. At how much shall Mr. Kim sells his residential unit acquired at a cost of
P6,300,000 if he desires a gross profit of
d. 30% of cost?
e. 30% of selling price?
3. Compute the fair market rent per square meter per month of a 500-square meter
land with a fair market value of P12,000 per sqm if interest rate per annum is 12%.

Case 2: Income Multiplier


Comparing the income of comparable properties
Sample question
Mr. X wants to purchase a property which is being sold at P7,000,000.00 . Its
potential rent income is estimated at P400,000.00 per annum. An adjacent
property is being rented at P300,000.00 and has estimated to have a market

value of P 4,500,000.00. At how much would Mr. X buys the property using the
income multiplier.

Cost Approach
Based on the concept that the estimate of a land and a building can be added
together to get the estimated value of land and building
Land Residual value real estate valuation that allow us to only value the
land
Building Residual value real estate valuation that allow us to only value
the building of
an improved piece of land
Formula :
Replacement or either reproduction cost-new less accrued depreciation
XX
Add: Estimated land value
Estimated value of land and building

XX
XX

Reproduction Cost-new cost to construct an exact duplicate of the subject


structure at todays cost
Replacement Cost-new is the cost to construct a structure with the same
usefulness (utility) as a comparable structure suing todays materials and
standards
Two types of cost in construction estimate:
1.

Direct Cost also called hard costs, are those expenses directly associated
with actual construction
2. Indirect Cost also called soft costs , are not directly related such as
permits, professional fees

Methods of estimating reproduction or replacement cost


1. Square meter method present cost per square meter of constructions
2. Unit in place method provides cost to construct a building by estimating
the cost of individual component
3. Quantity survey method needs to breakdown all components and
corresponding cost of a building

4. Index the original cost of the building is multiplied by a number that takes
into account the increase in construction cost.
Depreciation - a loss in value from any cause. It is classified in accordance
with the causes such as
1. Physical Deterioration loss in value brought about by wear and tear
Curable must spend for cost of repair
Incurable irreparable
1. Functional obsolescence inability of the structure to perform
adequately the function for which it is used.
2. Economic Obsolescence also called location or external obsolescence;
a loss in value as a result of impairment or desirability caused by factors
outside property boundaries i.e., inadequate public service, lack of
parking, illegal settlers
Accrued Depreciation is the loss in value from reproduction or replacement
cost-new as of the date of appraisal. This differs from accounting depreciation
Book value - the historical value of land and building (what is recorded in the
books of accounts)
Unearned increment an increase in value of the land for which the owner is
no way responsible
Estimated life or Estimated Economic life the amount of time which
income-producing property is about to provide benefits to its owner.
Actual Age the amount of time that has passed since the building was built
Effective Age subjective estimate age of a building based on the condition.
Excessive wear and tear can cause a propertys effective age to be greater than
its actual age
Scrap value or Residual Value estimated value of the asset at the end of
useful life.
Salvage value estimated value that an asset will realized upon its sale at end
of useful life
Method computing depreciation
Straight line method
a. Based on historical cost
Cost
less scrap or salvage value/ estimated life =
depreciation

annual

b. Based on replacement or either reproduction cost-new


Replacement or either reproduction
value/estimated life =
Annual accrued depreciation

cost

new

less

scrap

(note: annual depreciation can also be computed based on percentage)


Sample problems:
1

A prospective buyer of a house and 300 sqm. Lot consulted his architect
and advised that the present cost to duplicate the house is P3,000,000.
The architect also estimated that the effective age of the house is 10
years and the economic life for such structure is 50 years. If the buyer is
willing to pay P5,000/sqm for the lot, how much should he buy the
property?

2. Mr. Uy, an appraiser, was hired by ABC Corporation to determine the real
value of its land and building in Manila. The building was built 20 years
ago, 5 years after the land was acquired at a cost of P5,000,000 while the
land was purchased at P500,000.00 . Compute the estimated fair market
value of the land and building based on the following assumptions:
a. Building is to be depreciated at 2% fixed per year; land appreciates at
fix rate of 5% per year
b. The cost to reproduce the building at the time of appraisal is estimated
at P30,000,000
3. ABC Corporation bought a 3-storey concrete building 10 years ago at a
cost of P5,000,000. The building is being depreciated by the companys
accountant on a straight line method using 50 years as its estimated life.
The Board of Directors, in the desire to upgrade the financial report of the
company, hired the services of a competent licensed appraiser to
determine the true fair market value of the building. The appraiser
estimated the reproduction cost-new of the building at P15,000,000.00
and just used or followed the depreciation rate being used by the
company in estimating the building accumulated depreciation for 10
years. Based on the above information, compute the following:
a. Fair market value of the building
b. Unearned increment
TERMS AND DEFINITIONS
ABSORPTION RATE The ratio of the number of properties in an area that have
been sold against the number available. Used to show the volatility of a market.

ABSTRACTION METHOD This method of estimating the value of property uses


similar properties available in the same market to extract the value of a parcel of
land.
ACCESSORY BUILDING A building separate from the main structure on a property.
Often used for a specific purpose, such as a workshop, storage shed or garage.
AD VALOREM TAX Taxes assessed based on the value of the land and
improvements.
ADJUSTED SALES PRICE An estimate of a property's sales price, after adjustments
have been made to account for differences between it and another comparable
property.
AESTHETIC VALUE The additional value a property enjoys based on subjective
criteria such as look or appeal.
AMENITY Any feature of a property that increases its value or desirability. These
might include natural amenities such as location or proximity to mountains, or manmade amenities like swimming pools, parks or other recreation.
ANNUAL PERCENTAGE RATE The rate of annual interest charged on a loan.
ANNUITY A sum of money paid at regular intervals, often annually.
ARMS LENGTH TRANSACTION Any transaction in which the two parties are
unconnected and have no overt common interests. Such a transaction most often
reflects the true market value of a property.
BALLOON MORTGAGE A mortgage loan in which the monthly payments are not
large enough to repay the loan by the end of the term. So at the end of the term,
the remaining balance comes due in a single large payment.
BALLOON PAYMENT The final large payment at the end of a balloon mortgage
term.
BLIGHTED AREA Any region of a city or town that has fallen into disrepair or
otherwise has become undesirable.
BUFFER ZONE A segment of land between two disparate municipal zones which
acts as a shield to keep one zone from encroaching upon the other. Often used to
separate residential districts from commercial areas.
BUILDING LINE OR SETBACK The statutory distance between buildings and the

property line, imposed by municipalities, home associations, or other agreements.


BUILT-INS Specific items of personal property which are installed in a real estate
improvement such that they become part of the building. Built-in microwave ovens
and dishwashers are common examples.
CAPITAL EXPENDITURE An outlay of funds designed to improve the incomeproducing capabilities of an asset or to extend its economic life.
CONCESSIONS Additional value granted by a buyer or seller to entice another
party to complete a deal.
CONDEMNATION The official process by which a property is deemed to be
uninhabitable or unusable due to internal damage or other external conditions.
ESTATE The total of all property and assets owned by an individual.
FACADE The front exposure of any building. Often used to describe an artificial or
false front which is not consistent with the construction of the rest of the building.
FEE SIMPLE A complete, unencumbered ownership right in a piece of property.
FEE SIMPLE ESTATE A form or ownership, or holding title to real estate. It is the
most complete form of title, having an unconditional and unlimited interest of
perpetual duration.
FIXTURE Any piece of personal property which becomes permanently affixed to a
piece of real property.
GABLE ROOF A steeply angled, triangular roof.
GAMBREL ROOF A ''barn-like'' roof, where the upper portion of the roof is lesssteeply angled than the lower part.
GEORGIAN A classic, English-style hose characterized by simple rectangular
shape and multiple stories.
GRADE The slope of land around a building.
HIDDEN AMENITIES Assets of a property which contribute to its value, but are not
readily apparent. Examples might include upgraded or premium building materials.
HIGHEST AND BEST USE The most profitable and likely use of a property.
Selected from reasonably probable and legal alternative uses, which are found to be

physically possible, appropriately supported and financially feasible to result in the


highest possible land value.

IMPROVED LAND Any parcel of land which has been changed from its natural
state through the creation of roads, buildings or other structures.
IMPROVEMENTS Any item added to vacant land with the intent of increasing its
value or usability.
INCOME PROPERTY A piece of property whose highest and best use is the
generation of income through rents or other sources.
INVESTMENT PROPERTY Any piece of property that is expected to generate a
financial return. This may come as the result of periodic rents or through
appreciation of the property value over time.
LEASE A contract between a property owner and a tenant specifying the payment
amount, terms and conditions, as well as the length of time the contract will be in
force.
LEASEHOLD ESTATE A type of property ''ownership'' where the buyer actually has
a long-term lease on the property.
LIEN Any claim against a piece of property resulting from a debt or other
obligation.
LIQUID ASSET Any asset which can be quickly converted into cash at little or no
cost, or cash itself.
LOAN-TO-VALUE RATIO (LTV) The comparison of the amount owed on a
mortgaged property to its fair market value.
LOCK-IN An agreement between a lender and a borrower, guaranteeing an interest
rate for a loan if the loan is closed within a certain amount of time.
LOCK-IN PERIOD The amount of time the lender has guaranteed an interest rate
to a borrower.
MARGIN The difference between the interest rate and the index on an adjustable
rate mortgage.
MARGINAL LAND Land whose value has been diminished due to some internal
defect or external condition. In most cases, the cost to correct the flaw or condition

is as much or more than the expected return from the property.


METES AND BOUNDS A traditional way of describing property, generally
expressed in terms of distance from a known landmark or intersection, and then
following the boundaries of the property back to its origin.
METROPOLITAN AREA The accumulated land in and around a city or other
municipality which falls under the political and economic influence of that entity.
MINERAL RIGHTS The legal right to exploit and enjoy the benefits of any minerals
located below the surface of a parcel of land.

MORTGAGEE The entity that lends money in a real estate transaction.


MORTGAGOR The entity that borrows money in a real estate transaction.
NEGATIVE AMORTIZATION When the balance of a loan increases instead of
decreases. Usually due to a borrower making a minimum payment on an Adjustable
Rate Mortgage during a period when the rate fluctuates to a high enough point that
the minimum payment does not cover all of the interest.
NEIGHBORHOOD LIFE-CYCLE The evolution of neighborhood use and
demographics over time. Economic fluctuations, municipal zoning changes and
population shifts can effect the life cycle.
NEIGHBORHOOD A subsection of a municipality that has been designated by a
developer, economic forces or physical formations.
NET LEASABLE AREA The space in a development, outside of the common areas,
that can be rented to tenants.
NEW ENGLAND COLONIAL An architectural style dating from early American
history typified by a two-story building with clapboard siding.
NO-COST LOAN Many lenders offer loans that you can obtain at "no cost." You
should inquire whether this means there are no "lender" costs associated with the
loan, or if it also covers the other costs you would normally have in a purchase or
refinance transactions, such as title insurance, escrow fees, settlement fees,
appraisal, recording fees, notary fees, and others. These are fees and costs which
may be associated with buying a home or obtaining a loan, but not charged directly
by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be
higher than if you obtain a loan that has costs associated with it.

NON-CONFORMING USE The use of land for purposes contrary to the applicable
municipal zoning specifications. Often occurs when zoning changes after a property
is in use.
NONLIQUID ASSET Any asset which can not be quickly converted into cash at
little or no cost.
NOTE A legal document that obligates a borrower to repay a mortgage loan at a
stated interest rate during a specified period of time.
NOTE RATE The interest rate stated on a mortgage note.
OBSOLESCENCE The process of an assets value diminishing due to the
development of more desirable alternatives or because of the degradation of its
capabilities.
OCCUPANCY A physical presence within and control of a property.
OCCUPANCY RATE The percentage of properties in a given area that are occupied.

OFF-SITE IMPROVEMENTS Buildings, structures or other amenities which are not


located on a piece of property, but are necessary to maximize the use of the
property or in some way contribute to the value of the property.
OFF-STREET PARKING Designated parking spaces associated with a particular
building or other structure which are not located on public streets.
ON-SITE IMPROVEMENTS Buildings, structures or other amenities that are
erected on a piece of property and contribute to its value.
OPEN SPACE Any land which has not had any significant buildings or structures
erected on it. Most often used to describe desirable neighborhood features like
parks.
ORIGINAL EQUITY The amount of cash a home buyer initially invests in the home.

ORIGINAL PRINCIPAL BALANCE The total amount of principal owed on a


mortgage loan at the time of closing.
PLANNED UNIT DEVELOPMENT (PUD)
A coordinated, real estate development where common areas are shared and
maintained by an owner's association or other entity.

PLAT A plan or chart of a piece of land which lays out existing or planned streets,
lots or other improvements.
REAL ESTATE A piece of land and any improvements or fixtures located on that
land.
REAL PROPERTY Land, improvements and appurtenances, and the interest and
benefits thereof.
SCARCITY An economic principal that dictates the price of a good or service
through the interaction of supply and demand. When an item is scarce, its price
tends to rise, given a constant demand. Real Estate is a classic example of scarcity.
SECONDARY MORTGAGE MARKET An economic marketplace where mortgage
bankers buy and sell existing mortgages.
SURVEY A specific map of a piece of property which includes the legal boundaries
and any improvements or features of the land. Surveys also depict any rights-ofway, encroachments or easements.
TUDOR A style of architecture typified by exposed stone, wood and brick
construction. Similar in style to English manor homes.
UNDER IMPROVED LAND A piece of land which has been improved, but not to the
full extent of its potential.
UNENCUMBERED PROPERTY Any property which has no outstanding claims or
liens against it.
USEFUL LIFE (ECONOMIC LIFE) The span of time over which a property can be
used or can provide benefits to its owner.
VACANCY RATE The current percentage of vacant properties in a given area,
regardless of why they are vacant.
VARIANCE An exception to municipal zoning regulations granted for a specific time
period to allow for non-conforming use of the land.
ZERO LOT LINE A municipal zoning category wherein a building or other fixture
may abut the property line.
ZONE A specific area within a municipality or other jurisdiction which conforms to

certain guidelines regarding the use of property in the zone. Typical zones include
single-family, multi-family, industrial, commercial and mixed-use.

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