Deposits are typically refundable. The focus of this article are refundable deposits. Non-refundable deposits do exist, but they will be explained in another article.
A refundable deposit is a deposit that a tenant typically gets back after a specific period of time. The end of a specific period of time is typically the end of a lease.
The most common refundable deposits include:
- Security Deposits
- Pet Deposits
- Storage Deposits
- Key Deposits
- Last month's rent
Note: Regular security deposit records in accounting can be created automatically when you create a lease. If you need to create an entry of a refundable deposit to your books follow the instructions below:
To record a refundable deposit:
- Go to ‘Accounting’ Tab and click onto ‘Add’ dropdown and select add ‘Deposit’.
- Charge Tenant or Owner by selecting the Payer
- Select the Property
- Optional the Lease Agreement related to the deposit
- Select the liability account you want to Credit
- Amount of Deposit
Once a deposit has been recorded as a charge you can mark it as ‘paid’ once payment has been received.
Your General Ledger will show your liability charge once paid.
You need to refund a refundable deposit? Click here
- Refundable deposits is always a liability account. If you need to add another liability account for a specific refundable deposit, go to Chart of Accounts.
- If you receive a payment from a tenant that you have to return, record it as a liability.
- If a payment is for a compensation like rent or late fees, record it as income.
- Some areas have specific laws regarding the handling of deposits. If this is the case for you, please consult your accountant to ensure compliance.
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