closing fees

(noun)

a variety of costs associated with the transaction (above and beyond the price of the asset itself) and incurred by either the buyer or the seller. These costs are typically paid at a future point in time, known as the "closing" when title switches hands.

Related Terms

Examples of closing fees in the following topics:

  • Current Obligations Expected to Be Refinanced

    • To reduce the monthly repayment amount (often for a longer term, contingent on interest rate differential and fees)
    • To free up cash (often for a longer term, contingent on interest rate differential and fees)
    • Most fixed-term loans are subject to closing fees and points and have penalty clauses that are triggered by an early repayment of the loan, in part or in full.
    • Penalty clauses are only applicable to loans paid off prior to maturity and involve the payment of a penalty fee.
    • The above-mentioned items are considered the transaction fees on the refinancing.

  • Accounting Perspectives on Long-Lived Assets

    • Items that can be capitalized when the firm purchases a machine include the machine itself, transportation, getting the machine in place, fees paid for having the machine installed and tested, the cost of a trial run, and alike.
    • So, for example, the cost of land would include any attorney fees, real estate fees, title fees, back taxes that need to be paid, and the cost of preparation for the lands intended use.
    • Buildings also have additional costs such as legal fees and remodeling fees to prepare it for use.

  • Reporting Intangibles

    • Cost includes all costs of acquisition and expenditures necessary to make the intangible asset ready for its intended use—for example, purchase price, legal fees, and other incidental expenses.
    • The accounting treatment for purchased intangibles closely parallels that followed for purchased tangible assets.

  • Operating Expenses, Non-Operating Expenses, and Net Income

    • In real estate, operating expenses comprise costs associated with the operation and maintenance of an income-producing property, including property management fees, real estate taxes, insurance, and utilities.

  • Franchises and Licenses

    • Instead, the franchisee records a franchise expense when she pays the franchise fee.
    • If a business must pay licensing fees on a monthly or on an annual basis that coincides with the end of the business's fiscal year, the business does not record a license asset.
    • The fees that the business paid for those licenses are included as an expense.
    • If the license is for multiple years or accounting periods and is acquired by paying an initial fee, the license is recorded as an asset on the balance sheet and its value equals what it cost to acquire the license.

  • The Post-Closing Trial Balance

    • A post-closing trial balance is a trial balance taken after the closing entries have been posted.
    • The post-closing trial balance is the last step in the accounting cycle.
    • The post-closing trial balance can only be prepared after each closing entry has been posted to the General Ledger.
    • That is why it is necessary to run a post-closing trial balance.
    • The post-closing trial balance proves debits still equal credits after the closing entries have been made.

  • Closing the Cycle

    • Transferring information from temporary accounts to permanent accounts is referred to as closing the books.
    • The process of closing the temporary accounts is often referred to as closing the books.
    • Accountants may perform the closing process monthly or annually.
    • The Dividends account is also closed at the end of the accounting period.
    • The dividends account is closed directly to the Retained Earnings account.

  • Defining Liabilities

    • An example of a deferred revenue account is an annual software license fee received on January 1 and earned over the course of a year.
    • For the current fiscal year, the company will earn 5/12 of the fee and the remaining amount (7/12) stays in a deferred revenue account until it is earned in the next accounting period.

  • Assessing Fair Value

    • Transaction costs, such as brokerage fees, included in acquisition cost and capitalized, or immediately expensed.
    • Transaction costs, such as brokerage fees, may be included in acquisition cost and capitalized, or immediately expensed.

  • Accounting for Interest Earned and Principal at Maturity

    • Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets.
    • The percentage of the principal that is paid as a fee over a certain period of time (typically one month or year) is called the interest rate.