Have a client who has rented a shop, going through records I have found the £500 security deposit receipt. Now, we all know what they are for, but how does it get recorded because they MAY get that money back when the lease expires... does it get recorded
DR £500 shop rent (with a note saying secruity deposit)
CR £500 Directors capital account (paid it with own money not shop takings)
then reverse it out and treat as income when they have to leave??
Advise would be greatly received. :D
-- Edited by ClawzCTR on Wednesday 29th of May 2013 10:37:21 AM
the money is owed to the client so it is an asset in the same manner as a bank balance, not an expense.
Create a new bank T account for the deposit
Dr Deposit Account Cr Directors account
If at the end of the term the deposit is not refunded (it seems that they seldom are!)
Cr Deposit Account Dr Shop Rent (#1)
Note that you are still retaining the Directors contribution.
You are not however misclassifying money owed to the business as an expense of the business for the duration of the agreement.
HTH,
Shaun.
#1 or Shop repairs, or Bad debt, etc. There is some flexibility of interpretation in this area dependant very much upon the specifics of the scenario and consistency of application with similar transactions.
p.s. edited to add the (#1) and fix a couple of spelling mistakes so obvious that even I could see them.
-- Edited by Shamus on Wednesday 29th of May 2013 11:18:03 AM
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
