Security deposits are often treated as current assets or liabilities by organizations. Accountants do not like dealing with security deposits that have a return window of more than a year. Security deposits are often received or paid in advance before availing a service. Here you read what is Security Deposit and how to Record Security Deposit in QuickBooks.
What is Security Deposit in QuickBooks
These deposits are maintained in order to ensure that overdue payments and damages can be easily adjusted. With QuickBooks, users can not only record security deposits but also apply them to appropriate assets and liabilities accounts. Users can also use reporting tools in order to analyze data related to security deposits.
Steps for Record Security Deposit in QuickBooks:
- Go to “Chart of Accounts“
- Create a liability account and name it “Other assets.” This account can be used for collecting assets such as rent and security deposits.
Note: Users who are giving security deposits need to create a liability account instead of an asset account. Input the name of the new account as “Other liabilities.”
- Create a new product and name it Security Deposits. This product will contain all the information regarding security deposits made by you or made to you.
- Map the newly created product to Other Assets/ other liabilities.
- Users who are receiving security deposits can create a sales receipt to make it reflect in the appropriate account. Users who are giving security deposits can create a Bill and map it to the correct account.
- Click on Save and Close.
Once security deposits have been created, stored and mapped correctly, users can proceed to create reports using them. The data regarding these deposits will appear in most financial statements available in QB. Make sure to take a note of these numbers while creating those financial statements. Also, wrong information regarding these deposits can cause a mismatch in financial statements such as balance sheets, ledgers and so on. It is difficult to troubleshoot such inaccuracies.
You can also refund these deposits and delete the accounts associated with them. Though this may not be the ideal way of doing it, it is definitely the fastest one available to QB users.