How can I apply a tenant’s security deposit to a repair?

Are you sure you want to use the Security?  I'd strongly recommend you do not do this if the Tenant has not moved out.  Typically the Security Deposit is for when the tenant moves out and you determine if there are damages that you can no longer recoup from them.  If you use  the Security now, what are you going to use if there are more damages discovered when they leave?

If they damaged the property and it is not "normal use" where you need to actually pay for it, then I would Invoice them for the repairs.  You can either require payment in full or you could increase their rent by X amount to recoup the expense over time.  Pending what your laws are there regarding changing the rent, you may need to have a them sign an agreement acknowledging the increase is due to their damages.

If for some reason you really want to use the Security, then I'm assuming you have that Security Deposit in a Liability Account.  You would then just apply the Expenses for the repairs to that Liability Acct.  I'd then send them a Statement of their new Security Deposit Balance.  (But then what are you going to do if there are more damages after they move out???)

Thank you. 
The tenant already moved out, I am recouping most of the repair expenses through the use of the security deposit. 

you make it sound easy to “just apply” the expense to the security deposit account. Through a journal entry?

I need to keep track of the invoice I sent the tenant and would like to link the security deposit (in a liability account) to the payment of that invoice. 

thanks 

Thanks for getting back to us, @landlord-too.

I'll share some information about the tenant's security deposit. As mentioned by our Allstar @Pete_Mc, you can create an expense transaction and use the security deposit account to keep track of the deposit balance. Let me guide you through the steps.

1. Go to +New.
2. Select Expense.
3. Under Category details, choose the security deposit account. Then, enter other expense details.
4. Click Save and close. See the attached image below.

For more information about billable expense, check out this guide. This article will also apply to QuickBooks Online US version: Enter billable expenses.

The billable expense feature will help you keep track of your customer's expenses and invoices. 

Additionally, you can use journal entry to record the expense.

Please let me know if you have follow-up questions or concerns with security deposits. I'll be around for you. Take care and have a good one.

I have the exact same problem. Have tried a variety of things. Me too facing the similar issues.

Thank you for joining the thread, @Cynthia856.

I've come to help with your concern about applying tenant's security deposit in QuickBooks Online (QBO).

The instructions provided by Pete_Mc and my colleague ShiellaGraceA above should be able to help you apply the tenant's security deposit. 

If the steps aren't categorizing your accounts correctly, I suggest creating a  journal entry to this. However, I highly recommend seeking help from your accountant. This way, they can guide you on which account to use based on your business recording practices. If you don't have an accountant, you can find one through this website: Find an accountant.

You may also want to view all your sales and vendor transactions in QuickBooks. This will give you a great view of the status of your sales and expense transactions.

Please let me know how things go, @Cynthia856. I'll be around to provide further assistance.

@landlord-too @Cynthia856 

1) Create a journal entry to move the amount of the repair that the tenant is responsible for out of the security deposit liability account so that it can be applied to the tenant's invoice.  To do this, create a journal entry and debit the security deposit liability account and credit A/R.  Make sure that you include the tenant's name on the A/R line under 'Name'.

2) Enter the bill for the repair and check the box marked "Billable" and enter the tenant's name under "Customer".

3) Create an invoice to your tenant for the repair.  When you do this, QBO will alert you to the billable expense from step 2.  Add the billable expense to the invoice.  QBO will automatically apply the credit created in Step 1 to the invoice.

That's it.  Now you have the tenant's security deposit reduced by the amount of the repair and the invoice to the tenant is paid. 

BTW, @ShiellaGraceA 's advice will not work because it will reduce your security deposit liability account with a corresponding increase to A/P.  Doing it that way won't allow you to book the expense from your vendor for the repair. 

I have similar issue. Rather than apply it to security deposit, I invoiced her for the damage to our property. (It wasn't in her apt. but damage caused to something by her car). She wrote a check for the estimate to replace the item. I wasn't sure the proper way to set this up in Chart of Accounts. Should it be an account receivable or an expense item?

The way I stumbled into doing it was invoicing her $32 and then applying the payment she gave me to that invoice. In checking my Chart of Accounts, I see that it is an Account Receivable type of account. I can delete and change it to an expense account if that is right way. But in the meantime, I'm doing my taxes now and my TurboTax balance sheet is off by that exact amount of the damage: $32. I have more assets than liabilities. How do I make this work? I'll follow that procedure for future damages that I don't take out of Security Deposits.

Thanks in Advance

Rachel

In the attached/above message, the payment account is "Cash on hand". Is that acceptable? Why?  

Thanks for visiting the Community today, @hrent1

Having the correct payment account in applying your tenant's security deposit for repair is essential to ensure accurate tracking of deposits. I want to guarantee that I've got everything covered.

Could you tell me more about the attached or above message you've mentioned in the thread? This will help us gain a better understanding of the issue and offer enough appropriate information to guide you.

Moreover, Cash on hand is acceptable for recording transactions, such as bill payments, invoice payments, checks, expenses, and journal entries, since it's a bank account in QuickBooks Online.

I also recommend consulting a bookkeeper or an accountant for additional guidance. They'll be able to provide suggestions on the proper handling of these transactions.

Simply click the Reply button to post your comments. I'll be on the lookout for your response.