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Re: How do I record a security deposit I am putting up to one of my vendors on behalf of one of my clients?

You should be tracking this as an asset and not as an expense!

One of the potential ways you can handle this is by making a manual journal entry.

First, create an asset account (Other Current Assets "type") and call it. Security Deposits Made on Behalf of Clients (I like to be as descriptive as possible!)

Then create a journal entry.

Debit: Security Deposits Made on Behalf of Clients       $1,000       [Make sure to add the customer!]

Debit: Initial Set up expense                                                $500          [This gets offset by the fee income you charged]

Credit: "Bank account you paid it out of"                                         $1,500

 

Then when you get the money back you can reverse that entry

Debit: Bank account you receive the refund  $1,000

Credit: Security Deposits Made on Behalf of Clients    $1,000