converting liabilities

[David T.]

Greg,

Of course you can ask accounting questions here. I think Michael’s point is that how you handle this in GnuCash is dependent on several larger accounting issues, for which he/we cannot offer definitive answers. I will note that Michael’s answers are usually very responsible—if perhaps strongly worded. I will also note that he has more experience with accounting than I ever will.

Saying that, here is my take on his comments. Setting aside option (c) since it is likely not legal, we are left with (a) and (b). Option (b), Michael notes, would be more complicated—more complicated than my experience can illuminate. 

In (a), you will have incurred expenses, against which the deposit will be applied. That would be a transaction transferring funds from whatever account you tracked the deposit, into the appropriate expense account. 

Does that help at all?

David T.

> On Sep 29, 2016, at 9:47 PM, Greg Feneis <mfeneis at gmail.com> wrote:
> 
> Are accounting questions prohibited here?  I see them asked and answered by
> KIND people all the time.
> 
> Kind regards,
> 
> Greg Feneis
> 
> 
> On Thu, Sep 29, 2016 at 5:27 AM, Mike or Penny Novack <mpnovack at mtdata.com>
> wrote:
> 
>> On 9/28/2016 4:48 PM, Robert Merkal wrote:
>> 
>>> To Whom It May Concern:
>>> 
>>> how are security deposit liabilities converted to either income or
>>> expense after tenant leaves?
>>> 
>>> 
>>> Sincerely,
>>> Marion Merkal
>>> 
>> 
>> That is NOT a  gnucash question. You are asking how to book these funds if
>> you end up keeping them and that depends on whether you are legitimately
>> keeping them and the reason why legitimate. For examples:
>> 
>> a) The tenant left damage being which cost you as much (or more) to have
>> fixed than the amount of the deposit. You had an expense (the repairs)
>> which would have been entered as an expense and now you are offsetting all
>> or part of that expense (if the security deposit more than covered that,
>> you should have returned that balance --- properly submitting copies of
>> your repair receipts.)
>> 
>> b) The tenant leaving was a violation of lease terms (notice of quitting).
>> This is more difficult. That you had a "loss" of income because of time to
>> get a new tenant in probably is not an expense. It is going to depend on
>> the rules of your jurisdiction whether you can keep the deposit in this
>> situation, consult your lawyer/accountant. Similarly whether you should
>> treat as income (offsetting part or all of the lost income).
>> 
>> c) You are keeping these funds but not for a legitimate reason (according
>> to the rules of your jurisdiction). I am not able to advise. Again, consult
>> your accountant.
>> 
>> Do you see now why I say NOT a gnucash question?
>> 
>> Michael D Novack
>> 
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