How to apply security deposit to balance of rent due

I just started using Stessa and I am inputting all of my previous transactions. I had a previous tenant where I kept their entire security deposit. How would I enter that transaction?

Do I enter the security deposit when I received it and then nothing else?
Do I enter the amount of the security deposit when I received it and then enter it as income when I kept it?


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That’s a great question - Here’s how I did it. Like you said added to income then off set with the expenses I incurred to keep the deposit, posted to the specific unit with detailed notes and added the tenant letter explaining the deductions as a document - again tied to the unit. Best I could figure out and if I am consistent at lease I can explain to my accountant. I’ll be interested to see a reply from STESSA.

From a bookkeeping perspective, do we really have the deposit “accounted for” anywhere? It’s just a holding, not income, until it’s formally withheld. At that point, I think I usually just put it down as the top-level “Security Deposits” category (with it showing as refund since it’s a positive amount coming in). The actual repairs you’re doing would be categorized normally, I believe.

I’m no expert, though, just how I’ve handled it in the past.

@ehaug87 @rwsinterests @pete Here’s what we recommend with respect to security deposits…

When you receive the deposit, categorize it as “Money In” to “Security Deposits.” When you apply it to outstanding rent, record a new transaction as “Money Out” from “Security Deposits” for the amount being applied to rent and also record the “rent” you’re receiving as “Income > Rents.” That way your net in/out is correct for Security Deposits and you’re capturing the rental income as usual.

Finally, you’ll also want to reduce the security deposit amount shown for this tenant on your Leases & Tenants page by the same amount so that you don’t mistakenly refund too much upon an eventual move-out.

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@devin Is the “Security Deposits” category not part of any calculation? Just a separate “pool” of money to track, but treated different from Income–is that right? I’m guessing so, based on your explanation.

Slightly tangential, but this gets at a separate request to see a breakdown (with examples) of when to use the various categorizations…

@pete Yes, the Security Deposits category is primarily for tracking purposes. It is not considered income or rent and does not appear on the Income Statement or Net Cash Flow reports. The net balance of all ins/outs to the Security Deposit category does however show on the Balance Sheet report.

To expand on this some, if the security deposit is not being applied to rent and just a portion is just being withheld, do I need to apply the difference to an Income account? For example:
-Collect $2000 security deposit at Tenent move in ($2000 - Money In to Security Deposit)
-Tenent moves out but $1000 of security deposit is withheld and $1000 is returned. ($1000 - Money Out of Security Deposit)
Now balance sheet shows $1000 net positive in security deposits.
How do I balance this? Should I move remaining $1000 Money out of Security Deposit? If so, does it need to show as income somewhere?

@bradleyhager The question here is what is the $1000 of withheld security deposit being applied to, if not outstanding rent? You’ve handled the $1000 that is being returned perfectly, by the way.

If the withheld amount is to cover damage to the unit, then we would recommend recording it as $1000 Money Out of Security Deposits + $1000 Money In (refund) to whatever R&M account got hit with the actual repair expenses. Hope that makes sense!

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