The exact scenario is I am an independent consultant for multiple HR Outsourcing services. The program I am setting them up with is one of my vendors. I am putting up a $1,000 security deposit on my client's behalf which I expect to be refunded to me within a month or two. The $1,000 is part of a service fee I have already billed my client and recorded as fee income. This deposit will be refunded to me by my vendor within 6 weeks. Below are a few details.
- I bill my clients an enrollment fee / service fee when they are starting with one of our programs. In this example, $3,000 enrollment fee (assigned to Fee Income Account) of which $500 I pay to my vendor and record in a expense account for vendor enrollment fees.
- This particular vendor is requiring an additional $1,000 security deposit for this client which will be refunded to me after several weeks. I have already transmitted the $500 vendor setup fee and the $1,000 security deposit to my vendor. I recorded the security deposit in the same expense account that I use to pay my vendor setup fees. I am not sure if this is correct.
Am I correct in assigning the security deposit to an expense account or should it be assigned to other assets?
When I receive the refund from my vendor and record it to the fee income account, will this be duplicating my that income since I have already recorded it to my fee income account previously? Or, should it be assigned to some other account to offset the income?
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