Security Deposit Liability

When a customer pays a security deposit, a business needs to record a security deposit liability.

If the deposit is refundable within the a year, then the liability will be shown as a current liability, if not, then it should be shown as a long-term liability in the balance sheet.

Security Deposit Liability Journal Entry Example

For example, suppose a property rental business receives a security deposit of 500 from a tenant. As the amount does not belong to the business and will eventually be refunded to the tenant, it cannot be regarded as income and a security deposit liability account needs to be established.

The accounting records will show the following bookkeeping entry for the security deposit liability:

Security Deposit Liability Journal Entry
Account Debit Credit
Cash 500
Security deposit liability 500
Total 500 500

Security Deposit Bookkeeping Explained

Debit
The business has received cash from the tenant.

Credit
The cash represents a security deposit which, under normal conditions, is returned to the tenant at the end of the rental agreement. The amount is recorded as a security deposit liability on the balance sheet.

Accounting Equation

The accounting equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus the total equity of the business This is true at any time and applies to each transaction. For this transaction the accounting equation is shown in the following table.

Security Deposit Liability Accounting Equation
Assets = Liabilities + Owners Equity
Cash = Security deposit + None
500 = 500 + 0

In this case one asset (cash) increases representing money received from the tenant, this increase is balanced by the increase in liabilities (security deposit liability account).

Popular mdct.ru Examples

This security deposit liability journal entry is one of many examples used in mdct.ru, discover another at the links below.

Security Deposit Liability April 12th, 2017Team

You May Also Like


Related pages


future value of periodic paymentsaverage cost inventory methoddebt factoring exampleamortization calculator in excelpetty cash voucher template wordaccounting fob shipping pointhow to calculate overhead varianceretail inventory method formulacumulative prefered stockpetty cash voucher template wordaccounts receivable balance formulacalculating reorder pointbond accounting journal entriesnote payable definition in accountingweighted average inventory methodaccrued income journal entryadvance payment journal entrymarkup or marginhow to calculate accounts receivablecalculate net profit margin ratioprove it data entry practice testcapital gearing ratio formularecievable turnoverthe times interest earned computation isprepaid insurance on income statementprinciples of bookkeeping and accountingbank reconciliation tutorialprovision for bad debts in trial balancebills payable journal entrygoodwill impairment entrycollect accounts receivablebalance sheet tutorial for beginnerscalculate total variable costexample of a prepaid expensehow to calculate pmtentry to replenish a petty cash funddebit to retained earningsperpetuity calculation formulaimportance of petty cash bookmerits of double entry systemunderstanding debits and creditsa post closing trial balance should only containliquidity ratio formulaaccounts payable general ledgerhow to calculate installment loan formulacash suspense account definitionblank worksheet templatehow to calculate average accounts payableexpense accrual journal entryrule 78 calculatorstandard cost variance definitionthe purpose of closing entries is to transferexamples of accrual accountingaccounts receivable turnover ratio interpretationhow to calculate perpetuityjournal voucher in accountinginfinite cash flowdepreciation calculatorsfreight in journal entrycontribution margin analysis examplepayback period formula excellifo calculationsales ledger control account reconciliationaccrued revenue journal entry exampleapportionment of overheadsmeaning of amortization in accountingdouble declining depreciation calculation formulaformula of operating cycleperpetual periodic inventoryfinancial statement horizontal analysisexamples of bookkeeping ledgersa common size income statementexamples of accounting journal entriescash discount journal entry