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About LinkBacksWhere exactly does one record security deposit? This is related to rental property. I am wondering if I should have another prepaid deposit account like prepaid rent.
accounting for security deposits
Where exactly does one record security deposit? This is related to rental property. I am wondering if I should have another prepaid deposit account like prepaid rent.
If you want to record a security deposit that a tenant gave you, you should open up a new separate asset account and name it Security Deposit.
When at the end of the leas term you return the money, you will debit cash and credit security deposit. Remember that Security deposit is a liability so the initial entry will be a debit.
zahid
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Since the Security deposit is a liablity, you have to credit it, when you receive a check. So, the entry is dr. Cash, cr. Security Deposit.
When at the end you have to pay this money back to the rentor, you have to dr. Security Deposit account and cr. Cash.
Dear ZahiD,Originally Posted by tonalin
Security deposit is Liability for you that you have to refund when your tenant or you terminate the rental.
Debit Bank/Cash, Credit Security deposit. ( When you received Security deposit from Tenant.)
Debit Security deposit, Credit Bank/Cash. ( When you refunded Security deposit for termination of the rental by Tenant or by you.)
Prepaid rent from Tenant is a Liability for you.
Debit Bank/Cash, Credit Prepaid rent. ( When you received rental fee for the future month.)
Debit Prepaid rent, Credit Rental revenue. (When the month comes.)
I would place the security deposit cash under a separate asset account like "Restricted Cash".. this way you separate it from your operating funds and don't spend it on operational expenses..
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On the initial deposit of the Security Deposit, an entry of some sort (restricted cash, liability, etc) most be made. When the deposit is returned, the books will reflect a credit.
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