I am using the QB 2015 for Mac version. I started inputting data for my existing rental property business with a start date of Jan 1st 2017. I have security deposits for existing tenants dating back before that start date and have read to enter it as follows:
Enter Sales Receipt for unit
1. Item: Other Current Liability account "Security Deposits Held"
2. Deposit To: Current Asset account "Security Deposits Paid".
This way it doesn't impact my Income Statement or my bank account beginning balances by being deposited into a current assets account instead of a bank account.
Now I have to refund the deposit in full to the tenant when they move out next month. I experimented with writing a check to pull funds from a bank account to pay off the "Security Deposit Held" Current Liability account. That effectively zeros out my Current Liability for that security deposit but the amount is still showing up in my Other Current Asset account that I used on my sales receipt. My question is how can I zero out the Other Current Asset account? Should I have entered the sales receipt for the security deposit differently to begin with? Also, how would I enter the full refund since it was a security deposit for an existing tenant prior to my Jan 1st Quickbooks start date? I'm still new to Quickbooks & accounting so hope this makes sense.
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Use the same Item as you used on the named Sales Receipt. Put this on a Credit Memo for that tenant; now you can apply it to the final Rent invoice, Refund it from the Credit Memo, apply it to a Damage Invoice, or all of the above.
What you did with sales receipts and the asset account is as if you received the funds and have the funds in a separate bank account. If you do have funds on hand then you need to move them (transfer) from the SD asset account to banking.
If you are only holding the liability then the proper procedure would have been to "deposit" to owner equity if using the sales receipt approach (such that each tenant shows proper deposit)
Keep in mind that state laws differ and your state may require physical existence of funds in a separate interest bearing account and some states require that deposits be returned after a certain period of time and after that you no longer have funds on hand if the tenant trashed the place.
Judging by the post, I think you want to take a look at the INITIAL journal entry you are making.
Good job on recording in the liability account, but you do not need to make a debit to your current assets.
Instead, you would just make a debit to whatever bank account you received the funds into.
$15,500 Security Deposit Collected into Bank Account #23456
Debit: Bank Account #3456 - $1,500
Credit: Security Deposits Held - $1,500
Then when you refund the deposit you can reverse this, which is where you are getting a problem with the other current asset sitting there after you write the refund check!
My team works through about 40+ deposits a month, it can get tedious, let me know if this helps!
In QB, we avoid JE when Names are also involved for tracking and managing that activity.
And you don't Debit-Credit for Banking. You already have the Banking tools. Debit = Make Deposit, not JE.
The functions need to be in the name of the tenant or customer for tracking purposes. That means using Customer Transactions, not JE and not Debit-Credit.
It particularly matters when Trust Bank is involved and there is an audit requirement that proves Trust bank always matches Trust Liability by each customer name. That means you have both conditions for never using a JE, for these activities, such as law firm or landlord would have.
What if you have a partial refund because there was a cleaning fee charged and taken out of the SD. Now I have a balance left in the tenant's account. How do I take that remaining balance and transfer it to the bank account that I paid the vendor from, thus zeroing out the tenants account? Thanks!
Thanks for joining this conversation, @jasontrout.
You can create a journal entry to transfer the remaining balance from the security deposit to bank account. Before we proceed with the steps, I highly suggest consulting an accountant or accounting professional for guidance on which account receives the debit and credit side of the transaction.
1. On your QuickBooks company file, go to the Company menu at the top.
2. Pick Make General Journal Entries on the drop-down.
3. Enter a Date. The Entry No. should automatically populate.
4. Enter the necessary details, then hit Save& Close once done.
For additional information, check out this article: Record a journal entry.
That should point you in the right track. Please let me know everything goes. I'll be here if you need further assistance. Take care and have a great day.