do your tenants sometimes ask you to apply the security deposit to the last month's rent well
then you should watch this video applying security deposits to last month's rent
if you have any questions about this topic you can leave them in the comments section below and i'll
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it's very simple to apply a tenant security deposit to the last month's rent just
swap over the security deposit balance to the normal rent payout balance
then transfer the funds from the tenants trust account to the operating account for paying the
landlord later and then the last step is paying the landlord their normal monthly rent payout
the way you normally do that's it four simple steps so what will happen when we actually
change over or swap over the tenants deposit over to the rent payable for the landlord
well first the tenant security deposit liability account will go down because we no longer owe the
tenant specifically for a security deposit but what will increase is the balance of the rent
that we will pay out to landlords because now that is part of the future rent payout
so that's it four simple steps but here's the problem step number two can be a little tricky
step number two doesn't take one second with one entry it takes two seconds with two entries
well why is that why is step number two special so what exactly needs to happen well the tenant
security deposit was owed to the tenant so we can't have that in our records anymore
and if it becomes part of the rent payable to landlords now it's owed to the landlord
so because this is what needs to happen in your records it would be great if we could swap over
from tenant security deposit to landlord payout balances in one simple entry but quickbooks
won't let us do it in one simple entry it's the same problem that we spoke about before
regarding quickbooks desktop and receivable type of accounts only one accounts receivable account
per journal entry is the error message that you will get for example let's imagine on march 31
betty moves out and says please apply my security deposit to the last month's rent march
now it would be great if we could just record this in one simple entry it would be
great if quickbooks let us do this make a debit to the security deposit payable account
to decrease what you owe the tenant and make a credit to the rent payable account to increase
what you owe to the landlord as rent payout but unfortunately quickbooks will not let us do that
if you try to do it this way you will get this error message and we learned about this
error message before if only quickbooks would let us use more than one accounts receivable account
in a transaction we would be finished and this would be the easiest part of the course
but it will not so how do we work around this well instead of recording it in one step
with one second we record it in two steps and take two seconds first we have to move the tenant
security deposit to a place that quickbooks will allow us to post it then once it's there
we then move the security deposit to where it belongs in the rent payable to landlord clients
just like all the other normal rent payouts so what is this mysterious intermediate place
that will hold the tenant security deposit for a brief second we already know what that is
it's the already paid clearing account that's what we use to be able to work around
issues that quickbooks makes difficult for us so step one will look like this
debit the tenant security deposit liability payable account to make it zero or at least
remove that particular tenant's balance and make a quick credit to the already paid clearing account
what that will do it will move the tenant security deposit to the clearing account for a brief second
then we do the second step debit the already paid account to make it zero because we're done using
it and credit the account where the money belongs rent payable to landlord client and that will
increase the rent payable for the next monthly rent payout and what this journal entry will
do is move the money from the clearing account to where it belongs the rent payable
to landlord clients now what will be the result in the trial balance when we move a thousand dollars
of one particular tenant security deposit from the security deposit to the normal rent payout
well if we move a security deposit away that means that thousand dollars is going to decrease
this balance the tenant security deposit decreases by a thousand because we moved away from it
a thousand dollars worth of one of the tenant security deposit but where did it go when we
finish step two when we finished step two it went to the rent payable to the client for the
normal monthly payout and it increased the amount we're going to pay that landlord client for that
tenant security deposit so when we finish both steps rent payable to landlord client should be
1650 and tenant security deposit should equal 2 000. let's take a look at how to record step one
move it to the clearing account we click company make journal entry we put the date as march 31st
and we're going to make a debit to the tenant security deposit account for a thousand dollars
because it's a liability that we are decreasing because we no longer have that security deposit
and we're temporarily moving it into the already paid account one second save and close
uh excuse me we also have to include oh notice this uh we have to include
the name we have to include the customer in this case it's betty boop under alan orbee
and she must be put on both lines of the journal entry now when we click save and new
we can now move on to step two move the deposit to the rent payable account very simple
we now go to the landlord rent payable to landlord client and we credit that usually the debit
account goes first that's technically official form but doesn't really matter in the computer
so we debit the already paid account and we credit the the rent payable to landlord client
and in both cases you have to put the tenant's name so quickbooks knows which specific tenant
security deposit to remove now when we click save and close after step two and we take a look
you can see that the numbers are exactly as what we expected the tenant security deposit payable
has decreased to 2000 but the rent payable to landlord client increased to 1650
now the most important reports are the detailed reports when i look at the tenant security deposit
report i see that we pay back nothing to betty because on march 1 she gave us a security deposit
and on march 31 we made this general journal entry to bring her security deposit down to zero
why is it zero because if you look in the landlord payout balances report you can now
see that if you isolate march which is what you'll have to do when you work with this report you
have to isolate it by month to really understand what's going on hit refresh and you can see that
alan the landlord is now going to get this thousand dollars that came from the general
journal entry when you swapped over the rent that the uh security deposit that was owed switching it
over to the rent balance in this report so we now know how much to pay alan at the end of march now
there's one more part to this little story the last part we must transfer the tenant's deposit
from the tenants cash deposit bank account to the operating bank account so that you
can give them their normal monthly payout for the tenants rent less expenses and service fee
like we did before it's not recommended that you pay the landlord directly from the trust account
because the money is now simply part of the normal monthly payout so on march 31
we transferred a thousand dollars from the trust bank account to the operating account
and what will happen after step two well cash and bank will increase because we just put money
in the operating account and tenants cash deposit trust account the physical bank account that holds
tenants deposits will now decrease because it is no longer in the account it's in
the operating account because now it's part of the normal monthly rent payout
and what will happen in the trial balance when we move the money from one bank account to the other
well the tenant's cash deposit bank account will decrease by the thousand dollars we transfer
out and the chase bank account will increase by the thousand dollars that we just put in
and these will be the results after we make that very simple transfer on march 31
we click banking transfer funds and this is the easiest transaction in quickbooks the money is
coming from the tenant's cash deposit the money is going to the chase bank operating account
and the amount is a thousand dollars you can put a nice memo explaining applied betty
or whatever you would like to write save and close now the results are exactly as what we expected
cash and bank increased to 4800 tenants cash deposit decreased to 3 000
and now this 3 000 equals the total well it equals what they what you have
and then this will just get paid out with the normal monthly rent
you