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Experienced Member

Recording tenant security deposit payments received

We import all bank activities into QB directly so we can easily tag each transaction.

 

Tenant Security Deposit payments are deposited to a separate bank account only used to hold security deposits (our state law).  So when they are refunded, we have to then transfer this amount to the Operating Account to refund the tenant.

 

1) Under what category would I initially tag each tenant’s security deposit payment in QB online?  I know it would technically be a current liability, but the transaction comes from a bank (which is typically an asset).

 

2) When I issue a security deposit refund, I have to literally transfer the money from the Sec Dep account to the Operating acct to then issue a refund to the tenant.

 

How do I tag this transaction in the Sec Deposit bank account?  

How do I tag this transaction in the Operating acct?

 

Help?

7 Comments
Moderator

Re: Recording tenant security deposit payments received

Thank you for providing me with so much detail, bhtproperty.

 

I can help you tag this transaction in QuickBooks Online.

 

You're on the right track with creating a security deposit. Yes, the funds should be treated as a liability to show that it doesn’t belong to you until it’s used to pay for services.

 

First, let's create a liability account to track the amount of security deposits. Let me show you how:

  1. Select Accounting on the left pane, then choose Chart of Accounts.
  2. Click New.
  3. Choose Other Current Liabilities from the Account Type drop-down list.
  4. Select Trust Accounts - Liabilities under the Detail Type drop-down.
  5. Enter a name for the account (for example, Trust Liabilities) or accept the suggested name.
  6. Click Save and close.

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Next, create a service item that you can use when recording security deposits. Here's how:

  1. Click the Gear icon and choose Products and Services.
  2. Select New.
  3. Choose Service from the Product/Service Information.
  4. Enter a name for the service item.
  5. From the Income Account drop-down, choose Trust Liability Account.
  6. Click Save and close.

 

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When refunding a security deposit, you must first issue a check for the portion to be refunded.

 

Here's how:

  1. Click the Plus icon (+) and select Check.
  2. Enter the check information.
  3. In the Account details section, select the liability account you use for security deposits from the Account column drop-down list.
  4. Select Save and close.

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Here are some articles for the complete details about security deposits:

The information above should help you with the security deposits. I'm happy to help some more if you have other questions in QuickBooks. Enjoy your day.

Community Contributor **

Re: Recording tenant security deposit payments received

Thank you for your response.

 

I was told that because these security deposits are deposited into a separate bank account and because I have it set up that this bank account feeds directly to QB, that I cannot set it up as a liability.  As it is a bank account.

 

So is it true that the only way I would be able to set it up as a liability is that I would have to manually enter in each deposit?  Bc the way it's set up now, any/all deposits are automatically fed into QB via the bank feed.

 

Is there any other option?  Thank you so much.

QuickBooks Team

Re: Recording tenant security deposit payments received

Greetings, @abides.

 

Yes, the only way is to enter a deposit with a liability account. And I’d be glad to help you with this.

 

It’s just the same thing when you’re paying your liability expenses. Here’s how:

 

  1. Click the Plus (+) icon
  2. Choose Bank Deposit.
  3. Select the Bank account under Account.
  4. In the Add funds to this deposit section, fill out the information.
  5. Under the Account column, select a liability account.
  6. Enter the Payment Method and the Amount.
  7. Click Save and close.

I’ve got you an article to read on for your reference: How to Record Deposits.

 

If you have other questions about recording your deposit transactions, leave me a comment. I’ll be right here to answer them.

Community Contributor **

Re: Recording tenant security deposit payments received

Hi Mark_R,

 

I appreciate your instructions, but your instructions are based on what I would do to enter security deposits made INTO a bank account.

 

Our security deposit payments have already been deposited in the bank.  And this bank holds all the security and last months rent deposits (money is deposited directly into this separate account).  So these funds are actually in the bank account already and under the chart of account as 'bank' and this bank account has a live feed into QB online.  So anytime we have sec deposits, it is automatically fed into QB and we simply have to tag each transaction.

 

The issue is that the funds in this bank account should be converted to a 'other current liability'.  Bc as it stands now, it would appear as an asset on our BS when in reality it should be a liability.

 

Any advice?

 

Thank you.

Highlighted
QuickBooks Team

Re: Recording tenant security deposit payments received

Thanks for getting back to us, @abides.

 

Allow me to chime in for a moment and share some additional insights about recording security deposit payments in QuickBooks Online (QBO).

 

Since those payments are already in your bank account already, you can use the Transfer feature. This will help you transfer funds from your one account to another. Here's how:

 

1. On your QBO, go to the Plus icon at the top, then pick Transfer under Other column.
2. Select your bank account on the Transfer Funds From drop-down.
3. On the Transfer Funds To, pick Other Current Liability, then enter the Transfer Amount, Memo, and Date.
4. Click Save and close.

 

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For your reference, you can also check out this article for more information: Transfer funds between accounts.

 

That should do it. Please let me know how it goes by leaving a comment on this thread. I'd be glad to answer if you have any follow-up questions or concerns. Wishing you and your business continued success!

Experienced Member

Re: Recording tenant security deposit payments received

My question is about non refunding a security deposit.  The funds were received and credited to a liability account (I created an invoice and posted the deposit).  Now I need to move the amount form the GL liability account to an income account.  Can you help with this?

Thanks

QuickBooks Team

Re: Recording tenant security deposit payments received

Thanks for joining the thread, @CF60.

 

You can create a journal entry to move the amount from a liability account to an invoice account. And I'll be glad to share a few more options that you may want to consider.

 

Creating a journal entry to transfer an amount between accounts is just one of the four options you have. Your other options are:

 

  • Transfer
  • Check
  • Imported Bank Transaction

Since the amount is from a liability account, you'll need to create a journal entry to transfer the amount to an invoice account. Here's how:

 

  1. Click the Plus icon.
  2. Select Journal Entry.
  3. Enter the transaction date in the Journal date field.
  4. On the first distribution line, in the Accounts field, enter the correct account to the transaction.
  5. Enter the transaction amount in the Debits or Credits column.
  6. Choose the customer.
  7. Click Save and close.

But before doing so, I still recommend seeking help from your accountant. He/she could guide you which option to take based on your recording practice and business needs.

 

You can also read these articles for the detailed steps and information:

 

That's it! If you have any other questions, feel free to comment below. We're always here to help you.