Accounting for Security/Damage Deposits

[wannabecpa]

Hi,

I'm curious about the appropriate way to handle security/damage deposits. Is it best to actually deposit the check and then issue a refund check when an event is over (and no damage has ocurred), or is it best to just hold the check and return that same check to the customer if no damage occurred? What is most appropriate accounting-wise (or business-wise)

 

[kirby]

Let's say some lowlife has given you a "bad" check (NSF) as security for an event and actually causes damage. So then you go to cash it and - surprise! - bad check, which you would have found out sooner had you tried to cash it. So-- best to cash the check right away and then issue your own check as a refund.

 

[wannabecpa]

Thanks, Kirby. Makes sense!!