Utility Deposits

[debbie]

What is the best way to enter a security deposit that is paid to utility companies? The money will be returned after a set period of time with interest. The money is gone for the time being, but should it still be considered an asset? I'm not sure if it should be entered differently than you do a regular check - crediting the bank account and debiting an expense account.

Thanks for your help.

[Jeff]

You are correct a utility security deposit would be considered an asset. You will most need to create an asset account to hold the amount and you would credit the bank account and debit the security deposit asset account.

They will probably pay you interest when you get the deposit back. The interest paid should be shown as income at time.

[debbie]

I am still a little confused...
If I make the account under 1900 - Other Assets and make a detail account of 1901 for the electric company - the amount of the security deposit is included in the balance sheet under Net Assets - Unrestricted - Unrestricted Net Assets.

I was wondering if the account should be under Net Assets (equity) and shown as temporarily restricted. However, the manual seems to be saying that is only for donations.

[Jeff]

It is going to be shown in the equity sections because it is still something the church owns. Restricted equity are amounts the church has to spend for purposes designated by a contributor. Only contributors can restict money. (ie someone gives money for a new building, that money has to be used for a building.) You will get that money back and there is no restriction on its use when you do.

Equity does not equal the amount of money you have available to spend. Equity shows you the net worth of the church which will not equal the amount of cash you have available to you.

[debbie]

Thank you Jeff for taking the time to explain.