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how to record security deposits and payment made on behalf

Hi folks,

It would be great if you folks could give us a hand here. Our firm is a software service provider but don't know how to record the below two transactions.

1) Our customer gives us a security deposit  of $100 in exchange for our android tablets. (Our customers will get their deposit back should they decide to withdraw from our services.  


2) Our customer pays us $15 dollars to subscribe to a third party vendor service( this is not our income, our vendor charges $15 dollars so that's why we collect $15 from our customers)-

 

So how should we record these?
many thanks!

1 Comment
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Re: how to record security deposits and payment made on behalf

@NonFinanceFolks 

 

create a service type item named deposit, and link it to a liability account you set up called customer deposits
use that on an invoice or sales receipt when you get the deposit
use that same item with a qty of negative one when they with draw from the service if there is a balance due, or just issue the refund and use that deposit liability account as the expense (reason) for the payment

 

You can start a discussion as to whether or not the customer payment is income, in theory it is, and then you have an expense you pay, and on the P&L income is reduced by expense so it is a wash. But some states tax you on gross income, so use a liability account named for the service when you pay the expense, and use a service item linked to that liability account when you invoice the customer. the income and expense will wash in the liability account.