There are 3 typical situations that require interaction with a security deposit:

  1. Security deposit when a tenant moves in (move-in)
  2. Adding an additional deposit for a specific case (tenant adds a pet = pet deposit)
  3. Refund of security deposit when tenants moves out (move-out)

*Please note that in addition to what is explained here, your area might have specific laws regarding the handling of deposits. If this is the case for you, please consult your accountant for advice.

Follow our explanation below to understand how to record deposits during move-in, how you add deposits when an incident occurs during the course of a lease and how to refund deposits during move out.

1. How to record deposit during a tenant move-in

a. Invoice tenant for deposit

A security deposit is typically defined within a lease agreement next to other lease terms like rent amount and rent payment schedule. 

When you add a lease within ManageCasa, next to other lease terms you will find fields where you can enter the security deposit amount and the security deposit due date. Once you have saved lease terms it automatically creates the deposit receivable booking. 

If you did not enter this information under ‘add lease terms’ you can add security deposits as a manual charge to the tenant alternatively. 

Note: Once recorded your deposit record shows as a liability in your General Ledger.

b. Receive payment towards your deposit

Once you have recorded the deposit as an invoice to your tenant it appears as ‘unpaid’. From here you can record the deposit payment by your tenant.

If you have already created a ‘Security Deposit Bank account’ you can select it here to deposit the amount in. If you’re new to ManageCasa or have not created a ‘Security Deposit Bank account’ you can add it here by creating the name of the bank account, adding the opening balance as of (date), and applying the deposit to the newly created account for this and other deposits going forward. 

Note: Every deposit record will be shown together with the security deposit opening balance per period start date on the ledger and on the owner statement. 

2. Adding additional deposits during a lease lifecycle

There might be other reasons that you need to add a refundable deposit during the course of a lease relationship. Reasons can be that a tenant added a pet and you charge him a pet fee. To create such deposit in ManageCasa you are adding a manual deposit by selecting the liability account that you want to book this deposit against.

3. Handling a Refund of a Security Deposit during a move-out

When a tenant moves out there are a few scenarios that you can run into. Scenarios can be

a. Refund the full deposit amount(s)

Normally you will refund the full deposit amount back to your tenant when he moves out. To refund the deposit(s) you simple go to accounting and select ‘add refund’. In add refund you can look up all deposits the tenant has made by simple looking up the information by selecting tenant, property he rented and/or lease agreement. 

b. Refund partially by withholding funds from security deposit to pay expenses

In case there is a need to withhold funds from a tenant’s security deposit because of a damage or other costs related during his move-out, you can do this from the same interface by applying the required amount against such an expense.

When you withhold funds from deposit you you turn part of this deposit from a liability that you have into an income. This amount that you withhold from the security deposit bank account becomes then cash for the property that can be used for the expense that needs to be covered.

Follow this link to learn how to process a withholding within ManageCasa.

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