The sole trader would account for the transaction by crediting the deposit debtor and debiting either the sole trader bank account (if you paid them a cheque from the p/ship), or, debiting sole trader drawings (if we are just doing a paper transaction with no money physically being moved)
-- Edited by FoxAccountancyServices on Thursday 9th of May 2013 03:20:21 PM
A self-employed person joined a partnership, and as a result Business Premises Lease was changed with a change of name of a company.
At the start of the Head Lease the then self-employed person paid a deposit to the agency. And now, when Lease was "transfered", what happens to the deposit? Does newly formed Partnership pay it to now non-trading company (of former self-employed person)?
When the lease was transferred, did the leasing agency pay the deposit back to the sole trader, and then accept a cheque from the partnership?
If not, the partnership would show capital introduced from the person in question - credit capital introduced and debit rent deposit (balance sheet account) unless of course, the sole trader wants it back. Then yes, you pay it to them, crediting the cash/bank and debiting the rent deposit account.
To be honest, didn't think about it but now it seems like a brilliant way to do it!
No, the leasing agency didn't return the deposit, I guess because it's kinda the same person's name on the old Lease (.... T/As ...) and the new Lease (.... and .... T/As....).
One more question though, what does sole trader do with the deposit in their books, since their bussiness is non-trading now?
