How do I record a deposit that we are holding?

Recording Deposit Payments

If your organisation requires a deposit, for example, for a building booking, then you have two options: 

Option 1 - you can create a customer invoice for this (through the Invoicing module) and allocate the incoming amount as an invoice payment.

Option 2 - you can allocate the money simply as 'Other Income' or 'Bank Deposit' via the Bank Matching screen when you upload your bank transactions or via the bank deposit screen if it's cash or a cheque.

To allocate the money as 'income', simply follow the same process as you would for any other income transaction, allocating it to the relevant income category or creating a new income category as appropriate.

Top tip: If you create accounts on an accruals basis, if the deposit you are holding is of material value and you are still holding it at the end of the financial year, you would typically create a 'deferred income' adjustment in the Adjustments screen for the money being held (this is not relevant if you create accounts on a receipts and payments basis).

Returning of Deposits

  • For deposits that are non-refundable and are simply part of the overall total the person/customer needs to pay (e.g. a deposit to secure a booking), there is no need to deal with deposit income any differently to regular income.
  • For deposits that are returned (less any deductions such as breakages/cleaning), you should simply make a payment. If you originally created a customer invoice for the deposit (option 1 above), then you should create a customer credit note. When the transaction appears on the left-hand table of the bank matching screen you should match it by selecting the 'Payment of Credit Note' option. If instead you recorded the original deposit as 'other income' (option 2 above), then you should match it using the 'Income repayment' option. In either case, you should select the same income category as you did for the original deposit.

If you created a deferred income transaction via the adjustments screen when the deposit was received, then once the money is returned the adjustment transaction should now be reversed. This is also the case for non-returnable deposits or where a deposit is retained (e.g. to pay for breakages). Learn more here about recording adjustments.

Note: Deposits held for residential property, rented out through an Assured Shorthold Tenancy scheme, should be protected (held independently in the deposit protection scheme). You can read more about this on the government website.

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