Quick Question for Quickbook experts!

[Bryan Hylenski]

Hello All

Two tenants. 

1.  Move out Tenant, left the place a mess.  House needed cleaning, so we billed him 75$ for cleaning penalty fee.

2   Move-in Tenant said she would clean the place herself in exchange for the 75$.  Therefore her security deposit was 1750, but she only gave us $1675 (1750 - 75$). 

So, how do I show this in quickbooks?

All of my security deposits and rents are kept in the same business checking account. So I can't just issue a credit, because my business account will not reconcile.  Currently my Bank account is setup like this:

US Bank Bank Account...................................................$4444

Tenant A security Deposit.........................................$2222

Tenant B security Deposit.........................................$1111

As you can see my security deposits are NOT setup in a separate bank account. They are in the same.  Any ideas on how to bill this in QuickBooks??

Thank you!

[Marcia Maynard]

Originally posted by @Jennifer Pereira:

You don't need separate bank accounts although personally, I like to keep one account for operational income and expenses and a separate one for security deposits.  Comingling them can cause a cash crunch when someone moves out and it does obscure your cash flow position unless you're very diligent about accounting.

Check the laws for your jurisdiction. Washington State landlord-tenant law requires deposits to be kept in a trust account with a financial institution (bank, credit union, savings & loan, etc.) or licensed escrow agency in the state of Washington. This keeps the tenant security deposits separate from operating and capital funds. We set up three accounts at our credit union for each business entity (we have two LLCs). Checking account is for operational funds, Savings account is for capital funds and reserve funds, Money Management account is for tenant security deposits. Note, if you are an out of state investor with rental property in Washington State, be sure you keep your tenant security deposits in a qualified financial institution within Washington State. The landlord is allowed to keep all interest here.

When a tenant moves in we deposit their security deposit into the money management account. When the tenant moves out, we transfer the full security deposit into our checking account and write a refund check to the tenant out of the checking account. Any amount of the security deposit we are legally entitled to retain thus remains in the checking account and can be used to pay for unpaid rent, damages, cleaning, etc.

Washington law also requires the landlord to give the tenant a written receipt that shows the amount of the security deposit and the name & address of the financial institution where it is being held. If we accept a security deposit, the lease or rental agreement must be in writing and include the terms and conditions under which the deposit, or portion of deposit, may be withheld by the landlord at the termination of tenancy for failure of the tenant to perform their duties. 

So, in the situation the OP presents, we would not give a credit off of the security deposit for the cleaning done by the incoming tenant. Instead, we would deliver the unit clean at the start of tenancy and document the condition of the unit upon start of tenancy. If the unit was not clean upon start of tenancy, we would document that as well, along with any agreement we made with the in-coming tenant to clean it. After the in-coming tenant completed their cleaning, we would write a check to the tenant for the value of the work they did to clean the unit, then we would update the unit condition report to reflect the current condition of the unit and make it clear the unit would need to be returned to that condition upon move out. Everything in writing.