Various Types of Transactions - Part 6, Refund of Deposits Placed Earlier With Third Parties

I have discussed in detail the relevant double entries for the recording of rental income and the rental deposits and utility deposits in the books of the landlord, ABC Co. Ltd., in my post:Various Types of Transactions – Part 4c, Collection from Other Source of Revenue and Income (Rental Income).

The recording of all these transactions in the books of the tenant, XYZ Co. Ltd., are the opposite of those of the landlord. If XYZ Co. Ltd. records its transactions on cash basis, the double entry used to record the transactions when XYZ Co. Ltd. pays the monthly rentals is: -

	Balance Sheet		Income Statement
	DR	CR	DR	CR
Rental expense			xxxx
Cash at bank		xxxx

1. The double entry for the recording of the security deposits is: -

	Balance Sheet		Income Statement
	DR	CR	DR	CR
Refundable deposits (current assets):
- Rentals	3,000
- Utility	500
Cash at bank		3,500

2. The double entry for the recording of the 8 months rental (March 2006 to October 2006) is: -

	Balance Sheet		Income Statement
	DR	CR	DR	CR
Rental expense			12,000
Cash at bank		12,000

3. Recognition of November 2006 and December 2006 rental

	Balance Sheet		Income Statement
	DR	CR	DR	CR
Rental expense			3,000
Rental payable (current liabilities)		3,000

I will not elaborate further on these as the recording of the transactions is just the opposite of what I have shown in the earlier post: Various Types of Transactions – Part 4c, Collection from Other Source of Revenue and Income (Rental Income).

Let’s assume XYZ Co. Ltd. terminated the renting of the premise, the double entry to record the refund of the security deposits in the books of the tenant is: -

	Balance Sheet		Income Statement
	DR	CR	DR	CR
Cash at bank	3,500
Refundable deposits (current assets):
- Rentals		3,000
- Utility		500