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

Posted by learnaccounting on February 11, 2008

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    

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