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

The business has received cash from the tenant.

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 Examples

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

Security Deposit Liability April 12th, 2017Team

You May Also Like

Related pages

cash versus accrualcapital lease amortization schedulebookkeeping template excelincome statement single step formattrial balance format in excelthe asset turnover ratio is computed by dividingdebtors accounts receivablenet asset turnover ratio formulasimple bookkeeping template for excelallowance for doubtful accounts t accountretail markup calculatordisbursement ledgerretained profit meaningsimple bank reconciliation templategift card breakagecalculate the contribution margin per unithow to do fifo perpetual inventoryexample of three column cash bookaccount receivable interview questionsdeclaring a cash dividend willfifo accounting examplecreditor ledgerexcel bookkeeping templatejournal entry of bad debtsaccounting treatment of intangible assetsexample of accrued expensejournal entry for payroll taxescalculation of payback periodbookkeeping spreadsheet templatewhat is the present value of an annuityprepaid rent current assethorizontal analysis income statementaccounts payable debit balancegross profit method inventoryhow to calculate number of days sales in receivablespremium on bond payableadvantages and disadvantages of zero based budgetingprintable ledgercompute contribution marginaccounting aptitude questions and answersimprest petty cash templatehow to calculate the npv in excelnpv formula constant cash flowcalculate pv in excelbreakeven calculatorsperpetual inventory system and a periodic inventory systembank reconciliation interview questionsjournal entry for depreciation expenseretained profits meaningfinancial ratio calculator excelaccrued expenses balance sheetannuity discount factor tablepresent value of a lump sumvalue depreciation calculatorhow to calculate depreciation using double declining methodcompany bookkeeping templatesimprest balancefob destination freight prepaidwhats a debtormeaning of journal voucher in accountingpresent value annuity formulahow to calculate average receivablesnet credit sales formulaentry for prepaid insuranceexample of bookkeeping recordspayback period calculation formulasimple bookkeepingsupplier statement reconciliationaging accounts receivablecalculation of quick rationetcteditstock turnover ratio formula