Hello everyone! Can anyone please help me with how I can create an entry for return of security deposit which I received from a customer?
Thanks!
You make a payment from whatever bank or cash account you made the return from.
How did you account for the deposit when you received it?
It should have been recorded as a liability on your balance sheet - either as a negative amount in your Account Receivables or a positive amount in your liabilities
Why is a customer returning a security deposit to you? If you are in the rental business, your tenants (if renting property) or clients (if renting equipment) would pay a security deposit to you, and you would be returning it to them.
If you are paying a security deposit connected with something you are renting, the other party is a supplier, not a customer.
What? I don’t see where that was stated.
The original post is ambiguous and not sufficiently clear.
It can be interpreted in the way Tut did although I read it differently.
Try as I might, I don’t see any way to interpret this except that a customer returned a security deposit. How else can it be read?
The receiving could have been done in a time prior to the return - I understood that this was a descriptive clause and would have been better written as which I had received x time ago from the customer
I still don’t see it. Regardless when the receipt occurred, @Zohaib_Zafar said that it was received from a customer. I cannot think of any situation in which a customer would be the one to return a security deposit.
I understand that the customer paid a deposit or advance on a purchase and has no changed his mind. So that the business must now return the deposit or advance.
But perhaps Zofaib_Zafar could explain the transaction some more to clear up the confusion.
Now I get it—the question is whether @Zohaib_Zafar was referring to:
- A deposit he received from a customer or
- A return he received from a customer.
@Zohaib_Zafar, if it is the first situation, issue a payment posted to the same account (and subaccount if that was Accounts receivable or a special account) where you posted the deposit.
If it is the second situation, you need to furnish more information.
But that is exactly what they did say from the very start:
“he received from a customer” v’s “I received from a customer” - toss the coin or to rewrite the OP:
“how I can create an entry for return of security deposit which I (had previously) received from a customer?”
The subtleties and nuances of the English language may not be known to all users of the forum so problems of this sort are bound to arise from time to time.
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One post and no replies results in a relatively large amount of guessing imo.
I assume among the variety of responses @Zohaib_Zafar has found enough information to continue with his task
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@Tut @Joe91 , Actually It’s a import export business whos financial data I am maintaining on io.manager. So the scenario goes like this:
When a customer asks us to import something on his behalf, we sometimes ask new customers to pay us a security deposit which is refundable.
Secondly, Thanks for the help. I figured out how to make these entries =)
For some clear info on how this is typically done in accounting check https://www.double-entry-bookkeeping.com/other-liabilities/security-deposit-liability/ Obviously cash could be bank and in your case it is not a rental business but a deposit for your services. The important thing is that mostly these would be liabilities as you are expected to repay them when conditions are met. (Note that your customer would put this under current assets in their accounting system)
So this is not a security deposit in the typical sense, @Zohaib_Zafar, but an advance against future services. See the Guide: Record customer deposits and advances | Manager.