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Quickbooks Earnest Money Deposit - Lost
We walked away from a potential acquisition after our option period and therefore lost our Earnest Money Deposit. How do I record this loss/clear this in Quickbooks. Right now I have $1000 sitting in my Earnest Money Deposits (Other Asset) account.
Thanks in advance for your help!
You wrote a check for $1,000.00 for an Earnest Money Deposit.
It shows up in your Chart of Accounts under Earnest Money Other Asset Account.
Things didn't go as planned and now you need to remove it. If you lost the deposit you would then make it an Expense Account.
Let's say you lost the deposit money. You will need to credit the Earnest Money Deposit Asset Account and debit a Earnest Money Deposit Lost Expense Account. (Which means you will need to create that expense account in your Chart of Accounts).
The first line of the journal entry is a credit because you are taking the money out.
The second line is your expense account because you are putting the money in.
In the accounting world debits and credits are backwards and is why it is confusing to the normal person. You would think crediting an account would be putting money into that account, but not so in accounting. (Good Grief)
So let's take a look at our Chart of Accounts now.
We see the $1,000.00 is now gone from our Asset Account and is now an expenses account (which doesn't show up in the Chart Accounts. Instead the money shows up in our Profit and Loss Report.) So let's take a look at the Profit and Loss Report.
There it is as an expense account.
If you didn't lose the money and nobody cashed the check, then it is just an easy fix. Just go back into your Vendor Center and void the check and that will void the Earnest Money Asset Account as well.
Unless the check happened in a different period and you've already submitted financials to a 3rd party, I'd skip the J/E and just go back to the check and change the account to an expense as @Account Closed said. QB lets you add the new account on the fly from the Write Checks window.
Thanks all, I try to avoid those pesky Journal Entries whenever I can and created an Expense (Deposit Losses) account to capture these, very rare (hopefully) events!