Security deposits in accounting
The deposit is an amount of money temporarily held as collateral for possible damages. It is not a product purchased by the guest and not a service provided to the guest. For this reason, deposit is not an item on the order and not an Invoice item on the invoice.
However, deposit is something that must be paid.
Below we explain for a number of situations what is journalized with respect to security deposit.
Payment of deposit
Combined payment of €500 (including a €100 security deposit):
| Credit | Debit | Credit |
| Payment | 500 | |
| Prepayment | 367 | |
| Payable VAT | 33 | |
| Security deposits | 100 | |
| 500 | 500 |
Separate deposit payment of €100:
| Debit | Credit | |
| Payment | 100 | |
| Security deposits | 100 | |
| 100 | 100 |
Release of deposit
Release of deposit:
| Debit | Credit | |
| Security deposits | 100 | |
| Debtors | 100 | |
| 100 | 100 |
Refund of deposit:
| Debit | Credit | |
| Debtors | 100 | |
| Refund | 100 | |
| 100 | 100 |
Claiming deposit due to damage
Deposit is fully claimed:
| Debit | Credit | |
| Security deposits | 100 | |
| Damage | 100 | |
| 100 | 100 |
Deposit has been partially claimed and remaining portion released:
| Debit | Credit | |
| Security deposits | 100 | |
| Damage | 30 | |
| Reservations | 70 | |
| 100 | 100 |
Deposit is overclaimed and an outstanding amount arises:
| Debit | Credit | |
| Security deposits | 100 | |
| Damage | 300 | |
| Reservations | 200 | |
| 300 | 300 |
When you set up your first security deposit policy, a Ledger account is automatically created. The security deposit is journalized under general ledger account 2060. When damage has occurred, it is journalized under general ledger account 4300.
If you are working with a linked accounting program, don't forget to still create the Ledger account here.