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Security deposit accounting
Security deposit accounting tracks resident deposits as liabilities, from move-in receipt through move-out deductions or refund.
Definition
Security deposit accounting is the process of recording, holding, applying, and refunding resident security deposits correctly. Because a security deposit is refundable, it is treated as a liability when received, not as rental income. It remains a liability until the resident moves out and the operator has a documented, lawful reason to retain some or all of it.
Example
At move-in, a resident pays a $1,500 security deposit. The site team posts the payment to the resident ledger as a deposit liability, confirms it is correctly coded, and later uses move-out inspection documentation to determine whether any portion can be applied to damages before refunding the balance.
Why it matters
Security deposit accounting affects compliance, resident trust, financial reporting, and move-out operations. Accurate coding, documentation, and separation from operating income help teams avoid misstated revenue, improper deductions, refund disputes, and legal exposure.