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Finance - How to Process a Security Deposit and First Month’s Rent

Concepts

  • The security deposit is held in a pre-payment account in the balance sheet for a duration that is not necessarily defined at the time of deposit.
  • The first month’s rent is held in a pre-payment account until the first month’s rent is due.
  • Neither of these transactions has any effect on profitability of the Lot and therefore no entry is required directly in the Lot which would create a Job Cost Ledger Entry. These are just financial transactions.

Processing

Recording the Pre-Payment

  • For both transactions use the GL Journal. Fill in the following information:3
  • Posting Date
  • Document No. – can be whatever is easy to read in the GL Entries later.
  • Account Type = Customer
  • Account No. = Lookup and find the customer.
  • Amount = A debit value, the credit applies to the Balance Account.
  • Bal. Account Type = GL
  • Bal. Account No. = the Pre-payment GL account No. (although these can be the same for security and first month, it is easier to track in the GL if they are not).
  • Dim Phase Code = The Phase the Lot resides in.
  • Dim Lot Code = The Lot.
Note

The use of Dimensions means that we are tracking in the GL but do not need to track in the Lot.

  • Post the Journal and you will have a receivable setup for this customer and in the pre-payment accounts you will have entries that you can track by Lot No.

Bank Deposit for the Payment

  • Use a bank deport to process the payment against the customer the same as paying any customer.

Process a GL Journal to Clear out 1st Month’s Rent

  • At some point you will process a sales invoice for the first Month’s Rent. This will create a customer receivable (Dr) and a sales value (Cr).
  • You can clear the First Month’s Rent pre-payment amount as an offset the receivable.
  • Create a similar entry to the first one, just instead of entering the amount, use the “Apply Entries” button to select the receivable to clear. After you click OK, the value is automatically entered to the line.
Note

The system will NOT remind you to enter the Dimensions for Phase and Lot, if you forget to add them to the journal, it will be more difficult to know who has a deposit with and who does not.