UK Rent Deposit - where in the accounts is this recorded?


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If a company pays the landlord of a property a rent deposit to be held by the landlord in case the tenant should stop paying the rent, should this be recorded in the accounts as an asset?
 

bklynboy

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Yes. Its a escrow liability for the landlord and an asset for the lessee. Usually called "Rent Deposit".
 
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If a company pays the landlord of a property a rent deposit to be held by the landlord in case the tenant should stop paying the rent, should this be recorded in the accounts as an asset?
This is a prepayment.
DR:PREPAYMENT
CR:BANK this is when the money was initially paid

On a monthly basis CR:Prepayment and DR:Rent to charge rent expense
 
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If a company pays the landlord of a property a rent deposit to be held by the landlord in case the tenant should stop paying the rent, should this be recorded in the accounts as an asset?
That Security Deposit is a liability because the landlord holds it, to return it (hence the liability) if they have no expenses/damages adjust it. Upon move out, the liabity goes away when you expense out any part of it retained by the landlord and whatever portion is refunded to the tenant.
 

Fidget

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This is a prepayment.
DR:PREPAYMENT
CR:BANK this is when the money was initially paid

On a monthly basis CR:Prepayment and DR:Rent to charge rent expense
It's not a prepayment. It's a sum of money paid over and above the rent payable and it may, or may not, be refunded depending upon the conditions attached to it. It's a form of insurance for the landlord really.
 
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I fully understand. That said, if any of it could be refundable, you'd keep in on hand (different locations have different rules on if it needs to be in a trust account or not) but, if it may be refundable its a liability. If you keep money out to cover expenses owed upon move out, any remaining funds paid as a refund, would reduce the liability to zero. I hope this is of some help to you.
 

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