Refund a security deposit in QuickBooks Online

Learn how to return a part of a security deposit.

If you post security deposits you receive to a liability account, when you have to refund part of a security deposit, you must first issue a cheque for the portion to be refunded and record an invoice for the remaining amount, and then enter a adjustment note/adjustment to correct the liability account and to zero out the tenant balance.

Step 1: Write a cheque for the amount to refund

You can start the process of refunding part of a security deposit by issuing a cheque for the portion to be refunded.

To issue a cheque:

1. Select + New.
2. Under Suppliers/Suppliers, select Cheque.
3. Enter the cheque information.
4. In the Account details section, select the liability account you use for security deposits from the Account column dropdown list.
5. Select Save and close.

The next step is to create any necessary product or service items you will need to create an invoice for the un-refunded portion of the deposit.

Step 2: Create a product or service item

To create the necessary product or service item to use on the invoice:

1. Go to Settings .
2. Under Lists, select Products and services.
3. Select New.
4. From the Product/Service information panel, select the appropriate type of item to create.
5. Enter the product or service information for the item.
6. Select Save and Close.

The next step is to use the product or service items you created to enter an invoice for the portion of the deposit you are not returning.

Step 3: Create an invoice

To create an invoice for the un-refunded portion of the deposit:

1. Select + New.
2. Under Customers, choose Invoice.
3. From the Customer drop-down list, select the appropriate tenant.
4. Select the item you created from the drop-down list in the Product/Service field.
5. Enter the amount of the portion of the deposit you are not returning in the Amount field.
6. Select Save and close.

Once you have created the invoice, the next step is to enter a adjustment note for the amount that is not being refunded.

Step 4: Enter a adjustment note

To enter a adjustment note for the un-refunded amount:

1. Select + New.
2. Under Customers, select Adjustment Note.
3. From the Customer drop-down list, select the appropriate tenant.
4. Select the item you created from the drop-down list in the Product/Service field.
5. Enter the amount that is not being returned to the tenant in the Amount field.
6. Select Save and close.

Once the adjustment note is created, the next step is to apply the credit to the invoice you created.

Step 5: Apply the credit to the invoice

To apply the credit to the invoice:

1. Select + New.
2. Under Customers, choose Receive Payment.
3. From the Customer drop-down list, select the appropriate tenant.
4. Verify that the credit and invoice are both selected, and that the amounts are equal.
   If you don't see the credit and the invoice, they have been automatically applied, and you can select Cancel to skip this part of the process.
5. Select Save and close.

The tenant and the liability account both now have a zero balance.