Tenant security deposit when using 3rd party property mgmt

[Sam Dangremond]

Hello,

I have an obscure accounting / bookkeeping question I'd love some help on!

Namely, when using a 3rd party property management company, do I need to account for the tenant security deposit on *my* balance sheet?

With more detail: the 3rd party property manager collects the tenant security deposit from the tenant, and keeps it in an escrow account in accordance with all laws.  I never receive the tenant security deposit to my business checking account - I only receive the rental income, including when a tenant forfeits any portion of the security deposit.

My bookkeeper says I need to have a liability entry on my rental business balance sheet show that I owe the security deposit back to the tenant.  And I need an asset entry on my balance sheet, because the property management accepts the security deposit as my agent.

But that doesn't make sense to me.  I never touch the actual money.  The balance sheet entries should be on the property management's business, not mine - shouldn't they?

What do other investors who use property management do for this scenario?

Appreciate any thoughts and guidance!